Stock Market Investors Remain Unphased by Macro Events

Stock market investors have really shown their resilience this week, shrugging off several events that would have caused massive market selloffs in the past.

Instead of being waylaid by negative news events, investors have stayed the course. Instead of selling, they are buying.

The tech stock-heavy Nasdaq topped 6,000, setting new record highs. The Dow Jones Industrials Average passed 21,000 this week, which was only the fifth time it’s done that in its 131-year history.

Here, I’ll go over the week’s events, and what made investors, overall, remain content.

Not enough to move the market for the worst

The week started with the results of the French presidential elections. After receiving the most votes, far right candidate Marine Le Pen and centrist liberal Emmanuel Macron will face off in the second round of France’s 2017 presidential elections.

Markets responded to the news positively, despite the controversial Le Pen making it to the runoffs. It is widely thought that Macron will prevail, and the markets see that as a positive. We’ll see; the runoff is on May 7.

As that news was digested, pundits were counting down the number of days left in the first 100 days of President Trump being in office. Many eagerly pointed out that as the day approaches, Saturday, the new administration has made no major strides in passing legislation that meets the president’s campaign promises.

For example, repealing Obamacare stalled, and funding for the border wall hit its own wall.

The president was seen as losing focus again when he berated Canada putting the U.S. lumber and dairy industries at a disadvantage. Losing focus has been something that corporate leaders have said causes them angst. Many see the president getting caught up in distractions that lead him away from focusing on issues they hold dear like regulations and taxes.

Despite worries about Trump’s focus, investors shrugged it off.

Beat after beat after beat

The main reason the Street has shrugged off the many negative happenings of the week is due to it being earnings season. Companies are reporting their first quarter results, and so far, they are impressive.

Not only are companies beating analysts’ estimates, but they are beating them handily. Their results are coming in strong on the top and bottom lines. This means that they are reporting strong revenues on their top lines, and strong earnings and profits on their bottom lines.

FactSet released numbers about earnings when about 6% of companies in the S&P 500 had reported results for Q1 2017. It found that companies are reporting earnings that are 6.7% above the estimates, which is also above the 5-year average.

“In terms of sales, more companies (59%) are reporting actual sales above estimates compared to the 5-year average. In aggregate, companies are reporting sales that are 0.2% above estimates, which is also above the 5-year average.” – FactSet

The next blow

Another test of the resilience of stock market investors will come today. That’s because this is the day that the government will shut down if no agreement over the budget is reached.

The last government shutdown was in 2013, and it was the result of bipartisan bickering that interfered lawmakers reaching an agreement.

Again, with this latest looming shutdown, lawmakers are divided along party lines. President Trump, who has been criticized heavily for his border wall plans to deter illegal immigration from Mexico, threw lawmakers a bone.

He said he was willing to put off the wall’s funding until September, and it include it in the budget then. The current budget bill is temporary, meant to tide the government over until September, which is the end of its fiscal year. The new fiscal year begins in October.

On Thursday, a boatload of earnings came in, with tech giants Alphabet, the parent company of Google; Amazon, Microsoft on leading the pact.

We’ll see how their strong results could mitigate the possibility of no budget agreement being reached.

Be the first to comment on "Stock Market Investors Remain Unphased by Macro Events"

Leave a comment

Your email address will not be published.