S&P 500 already up 2.6% 2017

Greetings Friends,

The S&P 500’s strong momentum from late 2016 is carrying over into 2017.

U.S. and global stocks are off to a good start this year.

With January in the bag, almost every global stock index is trading well into the green. For example:

  • The S&P 500 (SPY) is up 2.6%
  • The Vanguard Global Stock ETF (VT) is up 3.9%
  • iShares Emerging Markets ETF (NYSE: EEM) is up 8%.

Take a look at the gains in the chart below.

spy jan 2017

The good start is being driven partially by momentum carrying over from last year. Investors were happy to get past the uncertainty of the election.

But there’s also another important factor at play.

After falling for five consecutive quarters, S&P 500 earnings are once again rising.

This is directly from Zacks Investment Research:

“As of Wednesday, February 1st, we have seen Q4 results from 219 S&P 500 members or 58.8% of the index’s total market capitalization. Total earnings for these 219 index members are up +5.4% on +3.5% higher revenues, with 64.8% beating EPS estimates and 53.4% coming ahead of top-line expectations.”

That is very respectable growth in any environment. But considering earnings have been falling for the previous five quarters, its excellent news.

Looking forward earnings growth is expected to accelerate and remain strong for the rest of the year. Take a look below.

zacks earnigns growth 5-6-17

I am expecting volatility in the short run. Remember, 5% and even 10% pullbacks happen on average once every 12 months.

I am also expecting plenty of the usual negativity from financial media. They are going to try and convince you the end of the world is coming and that the stock market is weak. Don’t listen. Stay focused on the long run, big picture.

But with earnings back on the rise after an extended slump, I am expecting another good year for U.S. and global stocks.

Cannabis Stocks off to Strong Start in 2017

The cannabis stock sector is also off to a good start.

The MJIC North American Cannabis Stock Index is up about 4.5% in 2017.

However, some of our favorite individual cannabis stocks have been crushing it.

At the top of the list, U.S. based cannabis biotech Cara Therapeutics (NASDAQ: CARA) – shares are up 79% in just five weeks.

Canada’s largest medical cannabis company Canopy Growth Corp (TSX: WEED) is up 15%.

Take a look below.

cara & cgc 2-6-17

Looking forward, I see a huge catalyst that I expect to send cannabis stocks into a new all-time high by the end of the quarter.

Canada will most likely vote on legalizing recreational cannabis this spring.

Here are a few articles if you want to take a closer look.

Canada Gears up for Cannabis Legalization in 2017

2016 Paved the Way for Legal Weed in Canada – 2017 Will be the Real Test

Even having a vote would be good for cannabis stocks.

If Canada voted yes, it would be a huge jolt for the cannabis industry and stocks.

I will be watching closely and keep everyone posted.

The Take Away

We’re off to a nice start this year.

Index funds are up. Blue chips are up. And cannabis stocks are up.

I am expecting volatility – but don’t sweat any of the short-term madness. Stay focused on the big picture. Use dips and weakness in the stock market to buy more shares.

Have a great week. I’ll be back in a few weeks with another update.

Your Investment Partner,

Mike

Disclosure: I own shares of Canopy Growth Corp (CGC) and Cara Therapeutics (CARA).

This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.