Outlook Corporate earnings season has kicked off with 83% of companies exceeding expectations on both earnings and revenues in a quarter that had many worried about the negative impacts related to tariffs.1 While we feel this is a good sign, it's important to note that with only 12% reporting so far, we are still early in the earnings season, and so the trend could reverse. We are cautiously optimistic, given that employment seems to be robust, wage growth is decent, and consumer balance sheets are reasonable.2,3,4 Stock prices are indeed reflecting continued strength, with the overall dividend yield rather low compared to bond yields on a historical basis. . . . U.S. equities saw modest gains in the prior week, with the S&P 500 and the Nasdaq Composite reaching new all-time highs. Investors took in positive economic data, including inflation readings that were in line with expectations and a retail sales report that exceeded forecasts. Corporate earnings are also pouring in with reported growth levels on pace to surpass expectations, further boosting investor sentiment. Tariffs continue to weigh on the markets, with investors and policymakers taking a wait-and-see approach. Throughout the year, tariff rates have moved higher, although inflation rates have remained steady, and economic growth has proven to be resilient. Last week’s announcement of the Consumer Price Index (CPI) and Producer Price Index (PPI) continues to suggest that the actual impact of trade policies on inflation and the economy seems to be limited (at least for now).
Core CPI, which focuses on changes in consumer prices while excluding the volatile categories of food and energy, increased 0.2% for the month, a surprising soft outcome, bringing the annual core inflation rate to 2.9%. Also, Core PPI, which focuses on changes in wholesale prices while excluding food and energy, showed no change in the monthly inflation rate. The data suggests that input costs for businesses are showing signs of stabilization while consumer-level prices remain slightly elevated, which may help alleviate inflationary pressure over time. Digging deeper into the underlying CPI figures, there was no significant evidence of tariffs on price changes. For example, vehicle prices fell for the month on both new (-0.3%) and used (-0.7%), while apparel prices (+0.4%) and household furnishings (+1.0%) saw a rise in prices. Furthermore, shelter prices rose only 0.2% for the month but was still the largest contributor to the overall move, as it accounts for one-third of the index weighting. Although tariffs have yet to cause a noticeable increase in inflation, future reports may begin to reflect some changes. Businesses across multiple sectors have built up inventories to mitigate potential price increases, which has likely played a role in limiting immediate pricing pressures.
In other news, the corporate earnings season is in full swing, with major banks, industrials, and consumer staple and discretionary companies reporting results. Thus far, earnings have been slightly better than anticipated; however, some companies noted rising shipping costs and increasing wages. We will hear from a slew of companies this week, including large tech names such as GOOGL, AMZN, META, NVDA, and AAPL. |
Aviance Capital Partners is a Naples, FL-based registered investment advisor with advisors in Naples and Orlando. We provide professional wealth management, financial planning, and investment strategies since 2009. Our financial advisors are fiduciaries, offering services such as retirement income planning, tax-efficient investing, and customized portfolio management, all designed to help clients achieve their long-term financial goals. Whether you're preparing for retirement or seeking a tailored investment management strategy, Aviance’s wealth advisors in Naples and wealth advisors in Orlando provide financial planning and investment management services to investors in all of Florida and beyond. Thank you for reading. If you have any questions or concerns, or would like to speak with a member of our team, please click the button below to reach out to us. We would love to hear from you! |
