Factors That Will Shape The Markets The Next Quarter


Factors That Will Shape the Markets The Next Quarter

Throughout the past several years, the market has been running with the bulls. However, there are several factors that threaten a reversal over the next quarter. These factors include…

  • This season’s earnings.
  • Economic conditions around the world.
  • The oil market.
  • Consumer spending.
  • Dollar strength.
  • Stock valuations.

Below, we’ll go over each of these in detail in order to decide if the market could be headed into bearish territory throughout the next quarter. So, let’s get right to it.

This Earnings Season Is Incredibly Important

Earnings are always important to investors. However, this season is different. This is the first season in quite a while that analysts are expecting overall declines in earnings in quite some time. Citing issues like low consumer spending in the period, the dollar’s strength, low oil prices and economic conditions around the world (all of which we will talk about later on), analysts are expecting the S&P 500 to experience a decline in earnings of 3% to 4.5%. It’s also important to remember that analysts have been wrong in the past. With that said, if earnings do decline as expected, we will likely see big declines in valuations. Adversely, on the off chance that this earnings season is positive overall, it could be just what investors need to keep the bull market in full swing.

Economic Conditions Around The World

Economic conditions around the world haven’t been as good through the beginning of 2015 as they have been over the past several years. As a matter of fact, there are quite a few major economic events unfolding around the world at the moment…

The Oil Market Is Also An Area Of Major Concern

Oil has been a major discussion in the finance space for quite some time now; and for good reason. The energy sector makes up a decent portion of the S&P 500 and will likely cause declines there. Also, oil is integral to several economies around the world; including the United States economy. However, a major supply glut caused the value of the commodity to decline dramatically toward the end of 2014 and has kept prices relatively low since. Now, there’s a new development pushing more oil on the market; which will cause further supply issues.

Earlier this week, the United States reached an unprecedented nuclear deal with Iran; one of the largest oil producers in the world. For nearly the past 2 years, Iranian oil hasn’t been able to reach the market as a result of sanctions. However, as a result of the nuclear deal, sanctions are likely to be lifted; giving 1 million barrels per day of oil their pass to reach the market. Considering that the world already produces 2 million barrels more per day than it uses; this is likely to exacerbate an already big issue and cause massive declines in oil yet again.

Consumer Spending Provides A Glimmer Of Hope

Consumer spending was a major area for concern earlier this year; however, there seems to be a bit of a glimmer of hope in the area at the moment. June consumer spending figures came in showing that there was a decline of 0.3% month over month. However, even with the current decline, the annual rate of growth in the figure is 2.6%; above the average of 2.3%. However, economists do state that spending could be growing at a much more rapid pace. Here’s what JPMorgan’s Chief US Economist Michael Feroli had to say about the report…

“Consumer fundamentals still appear pretty favorable, particularly the vigorous gains in job creation, but household caution still appears to be holding back a more rapid pace of spending growth…”

So, while the fact that consumer spending growth is above average could be cause for hope, the lower