And Back To The Fundamentals...

S&P 500 earnings for 2017 are expected to grow by 11.4%. which will be significantly better than earnings growth for 2016, which will come in basically flat (if Q4 earnings come in as expected).

The S&P 500 for 2016 returned (total return including dividends on a daily basis, source Bloomberg) 11.95%. In 2015, by contrast, the S&P 500 had a total return of 1.37% and in that year earnings growth was slightly negative.

Needless to say, investors have built a great deal of future earnings into the current pricing of the S&P 500 companies. In fact, the 12 month forward looking earnings per share (EPS) is at close to the highs at 17 times (relative to the 10 year average of 10.4 times).

Investors are rather positive then, about the outlook. 

However, as is the case usually about 2 times per year, the CNN Money Fear and Greed Index has peaked and is slipping out of the higher levels of "greed". Probably not a good sign for those who have been paying too much for US equities. It will be nice to have some extra cash on hand to pick up cheaper assets when the index heads into "fear" territory, which it does also usually a couple of times per year.

It's good to be tactical (our key theme for 2017)!

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Scott

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