Meant to publish this earlier this week…
Which sectors have improved in terms of Q4 ’15 earnings growth since Jan 1 ’16 ?
(First column is expected Q4 ’15 earnings growth as of Feb 9, the second data set is expected Q4 ’15 earnings growth as of Jan 1 ’16):
Data courtesy of Thomson Reuters:
Cons Disc: +9.6%, +8.5%
Cons Spls: -1.3%, -2.1%
Energy: -75.3% -67.7%
Financials: +2%, +10.9%
Health Care: +8.5%, +4.3%
Industrials: -1.8%, -1.8%
Basic Mat: -18.3%, -23.7%
Technology: +0.3%, -4%
Telco: +18.9%, +18.1%
Utilities: -9.3%, -6.3%
SP 500: -4.1%, -3,7%
The biggest improvement is Technology, albeit off low expectations. Health care is solid too, showing a 100% increase in actual versus expected, but it is clear the political climate is spooking investors. Look at Pfizer (N:PFE) and large-cap pharma for a safer way to play Health Care in 2016’s market. Biotech is finally getting interesting from a technical perspective: the O:IBB is down 35% from its $400 peak in July ’15. The 200-week moving average is $235.
S&P 500 Sectors ranked best to worst growth for Q4 ’16:
Telco: +18.9%
Cons Disc: +9.6%
HealthCare: +8.5%
Fincl’s +2%
Technology: +0.3%
Cons Spls: -1.3%
Industrials: -1.8%
Utilities: -9.3%
Basic Mat: -18.3%
Energy: -75.3%
Q1’16 sector growth rate change from Jan 1 ’16: (Note Energy – wow)
Cons Disc: +15.3%, +18.3%
Cons Spls: -1.3%, -2.3%
Energy: -87.2%, -41.4% (far worse than the rate of decline from last year – hard to believe how this gets worse)
Fincl’s: -0.9%, +2.4%
HlthCare: +6.4%, +7.4%
Industrials; -3.1%, +3.1%
Basic Mat: -14.1%, -1.1%
Technology: -5.5%, +1.7%
Telco: +4.7%, +5.8%
Utilities: -1.8%, -1.2%
SP 500: -4.2%, +2.3%
For the current quarter, expected growth for Consumer Discretionary, HealthCare and Telco again top the list for the sectors with the best expected growth
2016 estimated earnings growth (full-year)
Cons Disc: +12.9%, +15.2%
Cons Spls: +4.1%, +6.3%
Energy: -50.6%, -10.1%
Fincl’s: +8.4%, +8.8%
HlthCare: +8.1%, +9.6%
Industrials: +4%, +5.4%
Basic Mat: +1,5%, +11.6%
Technology: +3.1%, +7.4%
Telecom: +2.6%, +2.3%
Utilities: +4.1%, +3.7%
SP 500: +3.9%, +7.6%
Analysis / commentary: The decline in Energy estimates continues to be nothing short of tragic. I was having lunch with a client last week, who works at a large bank, and the regulators came through the bank and told the institution to write their energy loans down, whether they were performing or not. Shades of 2008 i.e. “you will take this equity whether you want it or not”.
For full-year 2016, HealthCare and Consumer Discretionary, still show the best growth, but the Financial sector for the next 11 months looks far better than the rapid drop for Q4 ’16.
There are places to hide in this market and it may be last year’s losers.
I still think the US dollar weakening will help take some immediate pressure off the SP 500. Today, the US dollar index dropped again. Technology and Industrial’s should be the immediate beneficiaries of a weaker dollar.
The 4 sectors or asset classes that have been thoroughly trashed since last summer and have suffered the biggest declines are biotech’s, Transports, small-cap’s (Russell 2000), and Emerging Markets. The Transports look to be bottoming. Emerging Markets are range-bound.