Overview
- Even people who warned of big corrections if Trump were elected are now calling for bigger gains to come
- The volatility index (VIX) fell to it’s lowest level in 2.5 years last week
- The crude oil volatility (OVX) fell to two year lows
- Treasury yields (10-year) have jumped above 2.5% (up from 1.36%)
- The S&P 500 recently traded at 22.3 times what it’s companies earned in previous 4 quarters
- Higher than 92% of readings since 1929
- The previous 9 times when trailing price/earnings valuations topped 22 times, the index saw pullbacks avg 2.6% 3 months later and 6.2% after 6 months
- Sentiment has improved, but data says household spending has not
- The US economy may be “humming along” but it needs a new catalyst to show investors we aren’t at the peak of the current cycle - Nicholas Colas, Convergex
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- For now sentiment is enough, but in 2017 the new administration will need to deliver
- The IPO market was down big in 2016 and could be poised to rebound in 2017
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- Says Kathleen Smith of Renaissance Capital
- She estimates the pipeline to be 250 companies strong (were 275 in 2014)
- Spigot could open in mid-Feb
- Of note, Snapchat has filed to go public
- Thanks to a new accounting rule, many companies will report better looking profits
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- The rule lets companies use stock based compensation benefits ot reduce their income tax and boost earnings
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