May 2, 2016 - Despite stocks selling off last week on weak technology sector earnings and soft U.S. economic data, we remain encouraged by several developments. Europe’s economy continues to improve while China’s economy is showing many signs of stabilization (see bottom 2 panels). U.S. economic data remains consistent with further economic growth and an accommodative Federal Reserve is helping lift the global economy and risk assets. The news from Q1 earnings season is that profit growth is bottoming while higher oil prices imply better energy sector profits and lower energy sector loan defaults going forward. All of this should support stocks and other risk assets, and we are now more positive on the cyclical Energy and Industrials sectors. We remain overweight the defensive sectors that have demonstrated revenue and earnings growth. These include Health Care, Telecom and Consumer Staples.
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