May 2016 || Newsletter
Equity indexes gave up most of their April gains during the month’s last trading sessions after the Bank of Japan shocked the markets by not adding to its monetary stimulus; the Nikkei 225 Index plunged by 3.6% in the wake of this decision while the EuroStoxx 50 Index lost 3.1% the day after. Currency volatility remained at elevated levels with the yen recording its biggest weekly gain against the dollar since 2008 and the Dollar Index falling for a third consecutive month. In contrast, commodity prices recorded significant gains.
The 1Q16 earnings season is well underway with more than 70% of the S&P 500 companies having reported. In truth it has been a mixed bag that has failed to steer the markets in any particular direction. Out of the 361 S&P 500 companies having already reported, 74% have beaten profit estimates and 54% revenue estimates. In Europe, 59% of the companies have beaten earnings estimates and 44% sales estimates. It is important to note however that these numbers don’t look too bad because of much lowered 1Q estimates.
Amongst the major disappointments, Apple posted its first quarterly decline in revenue in 13 years and missed analysts’ revenue and profit expectations due to slowing iPhone sales; Apple also projected that revenue in the current quarter would fall far short of expectations. Conversely, Facebook and Amazon delivered very strong results as they continue to benefit from their ever-growing dominant market position.
- The underperofrmance of Japanese equities
- The ongoing rally of commodities
- Key Data
- Investment Strategy
- Portfolio Activity/News