All of the major indices sold off hard in the latter half of August, with the S&P 500 and Dow falling more than 4% for the month. As I mentioned in Tuesday’s Market 360, the stock market failed to launch.
September also had a rocky start. We had a bit of a reprieve from selling yesterday, with the S&P 500 up 1.8%, the Dow up 1.4% and the NASDAQ up 2.4%. I explained to my Platinum Growth Club subscribers in a Special Market Podcast that the rally was largely due to Apple, Inc.’s (NASDAQ:AAPL) iPhone 14 announcement and a decline in the 10-year Treasury yield. (I’ll talk in more detail about Apple’s big event in tomorrow’s Market 360, so stay tuned for that!)
The fact is there is a lot of noise in the market right now affecting the price of stocks… everything from Federal Reserve commentary and action to continuing COVID-19 lockdowns in China.
Couple this with the fact that September is historically the worst month for the stock market, and the latest bout of volatility is not a surprise.
Unfortunately, I don’t expect the volatility to ebb, as there are several clouds hanging over Wall Street that could continue to weigh on stocks.
I’ll talk in more depth about each of these clouds in tomorrow’s Breakthrough Stocks Monthly Issue for September, but for today’s Market 360 I’d like to give you a sneak peek at the third storm cloud: a decline in S&P 500 earnings.
The Third Storm Cloud Overhanging Wall Street
Most of the S&P 500’s industries are now forecast to post earnings declines for the rest of 2022 – and this earnings decline is the third storm cloud overhanging Wall Street.
According to FactSet, the analyst community has lowered third-quarter earnings estimates by a bigger margin than normal. Earnings estimates have been slashed by an average 5.4%. Only two of the S&P 500’s 11 sectors have had earnings estimates increased in the past two months, with energy’s earnings estimates upped by 9.6%.
The reality is that nearly half of the S&P 500’s revenues come from outside of the U.S., so many multinational companies are struggling due to a strong U.S. dollar. Year-over-year comparisons are also growing more difficult. So, while it pains me to say this, the upcoming third-quarter earnings season will be ugly for many S&P 500 companies. My favorite economist, Ed Yardeni, expects the S&P 500’s earnings to decline 5.4% in the third quarter.
Invest In Companies With Growing Earnings
To be successful in the current market environment, you need to remain invested in companies that are able to maintain robust earnings and sales growth, as well as benefit from positive analyst estimates. That’s exactly the case with my Breakthrough Stocks. My Breakthrough Stocks Buy List remains characterized by 43.3% average annual sales growth and 204.1% average annual earnings growth. I should also add that our Buy List stocks are currently trading at a median price-to-earnings ratio of 10.9X current earnings and only 4.65X median forecasted earnings. They’ve also benefitted from an average 11.9% increase in earnings estimates in the past month.
I’ll explain why my Breakthrough Stocks’ earnings are bucking the S&P 500’s trend in tomorrow’s Monthly Issue. I’ll also reveal my newest addition to my Breakthrough Stocks Buy List: a company that achieved record revenue in the second quarter and triple-digit earnings growth. It also boasts a solid dividend.
Now, if you join me at Platinum Growth Club, you’ll receive the Breakthrough Stocks Monthly Issue and recommendations as soon as they’re released. You will also have full access to all of my stock services – Growth Investor, Breakthrough Stocks and Accelerated Profits – which totals to more than 100 stocks, as well as my Power Options service. This options service focuses solely on LEAPS (Long-Term Equity Anticipation Securities) call trades. These are a great investing vehicle to turbocharge your portfolio.
Of course, you don’t have to invest in all 100+ stocks. If you’d rather start small, I have you covered there, too. My Platinum Growth Club also comes with my exclusive Model Portfolio. I handpick all of my Model Portfolio recommendations from my different services, so you can rest assured that you’re always invested in the crème de la crème.
I should add that it’s a great time to join. I will be hosting my exclusive Platinum Growth Club Live Chat event for this month next Monday, September 12, at 12 p.m. Eastern time. I’ll be covering several topics – my current market outlook, the upcoming September Federal Open Market Committee (FOMC) meeting, the energy crisis and September Seasonality – and I’ll also take some time to answer Platinum Growth Club subscriber questions. If you sign up now, you still have plenty of time to send me your questions.