The equity markets have been mired in uncertainty this week, as geopolitical hotspots Syria, North Korea and Afghanistan all have caused a bit of a risk-off trade in stocks.
Then there are the homegrown policy concerns still plaguing Wall Street, including healthcare reform and corporate tax reform. After saying he would pivot to tax reform following the recent Congressional failure on healthcare, President Trump now appears to be renewing his efforts on the healthcare front.
While the geopolitical and policy uncertainty abroad and in Washington are weighing down stocks here, what we really need to start seeing is a return to good earnings to let us know what’s next for markets.
Thursday, we got the first salvo in the Q1 earnings bombardment, and we got it in the form of earnings from several key financial bellwethers.
For those wanting to see positive hard data start to back up the recent positive sentiment indicators, today was a pretty good day.
Three of the four major financials reporting today bested estimates, including JPMorgan Chase (JPM), Citigroup (C) and PNC Financial Services Group (PNC).
So, is this ray of earnings light from these banks enough to illuminate the way forward for the bulls?
In the case of JPM, it reported EPS of $1.65 on revenues of $25.6 billion in Q1. This easily bested expectations. On the revenue front, JPM saw a 34% year-over-year gain to $1.65 billion in its investment banking operation.
That’s an upbeat sign for the economy and markets going forward.
JPMorgan’s high-profile CEO Jamie Dimon also made some upbeat comments about the quarter, and about the future of the bank and the economy in the firm’s earnings release.
"U.S. consumers and businesses are healthy overall and with pro-growth initiatives and improving collaboration between government and business, the U.S. economy can continue to improve … We will be there to do our part, strong and steadfast in good times and bad, and working every day to support our clients and our communities."
Dimon also noted that the bank’s consumer businesses continued to grow. The bank saw $622.9 billion in deposits, up 11% year-over-year. Loans also increased by 5% to $466.8 billion.
"The consumer businesses continue to grow core loans at double-digits, outperform the industry in deposit growth, and we once again had very strong card sales volume growth this quarter — reflecting our commitment to providing our customers the innovative products and services they want."
The JPM loan metrics are encouraging, as they somewhat contradict the recent data we presented in Tuesday’s Afternoon Edition, "How Come Nobody Wants to Borrow Money?"
As for the other financials reporting Thursday, there were good metrics from Citigroup (C), which bested estimates on both the top and bottom lines.
The company reported quarterly profits were up 17% from the same quarter a year ago, driven by higher revenue and the lower cost of credit.
C’s top line increased 3% to $18.1 billion, beating estimates of $17.8 billion. On the bottom line, EPS roared in at $1.35 vs. estimates calling for just $1.24.
PNC Financial Services Group (PNC) also posted an earnings beat, with EPS of $1.96 vs. estimates for just $1.84. Revenue for the quarter also was strong at $3.88 billion, a 6% rise year over year, and better than the $3.77 billion analysts were anticipating.
The only financial stock that didn’t knock it out of the park was embattled money center bank Wells Fargo (WFC).
Not surprisingly, the phony account scandal took its toll on the bank’s top and bottom lines. Still, Q1 profit managed to come in flat even though revenue fell short of estimates.
The bottom line here is that this first round of bank earnings is encouraging. And despite the noise of geopolitical tensions and Washington policy concerns, hard economic data might actually be OK for Q1.
At least, that’s what the bulls are hoping for.
Gold bulls sure are having a party right now. And Sean Brodrick, our resident small-cap mining expert, says the party hasn’t even gotten started in earnest!
Mining for Money
This Gold Party Ain’t Started Yet
By Sean Brodrick
You know who hates this market right now? Every investor who hasn’t bought gold and miners, thinking the rally this year is just a flash in the pan. I see "sour grapes" stories in the mainstream media all the time, talking about how gold is doomed. Doomed! DOO-OOMED!
Ha! I welcome their hatred of this rally. Their bitterness. They’ll change their minds eventually. And you know what? Plenty of ’em, when they finally go long, will STILL make money.
That’s because this gold rally hasn’t even really started yet. Let me show you a long-term chart of gold.
This chart shows the last big bull market in gold, and the subsequent 5-year-long bear market, and the new bull market.
Wait! No! It doesn’t show a new bull market at all. Even though I’m certain gold entered a new bull market at the beginning of 2016, chart-wise, that rally isn’t enough to break the big bearish trend that has been in place for six long years!
That’s right. The downtrend started before the official bear market began. Gold has trended lower for six years!
So could the bears be right? Could gold’s doom be nigh?
But those bullish forces DO exist. The tide in gold has turned. And we are getting closer to a big breakout.
And let me tell you this: Every investor who is long gold and miners should stand up and give President Trump a standing ovation. He’s the force behind the recent gold rally.
First he bombed Syria. Then he threatened North Korea. Then he dropped all talk of China being a "currency manipulator." Then the Prez told the Wall Street Journal that the U.S. dollar is "too strong."
Result: The U.S. dollar looked back over its shoulder wistfully, then did a nose-dive off the roof. And as the greenback tumbled lower, gold jumped higher. That’s the "seesaw of pain" I keep telling you about.
Then today, Mr. Trump bombed an ISIS target in Afghanistan. And gold gleamed even more.
Sure, I expect that what Trump giveth, he can taketh away. If and when things smooth over with North Korea, we’ll see a pullback in gold. Likewise, he talked the dollar down one week, so he can talk it up the next.
And there is still plenty of bearish sentiment lately. That’s why many miners have been laggards. Investors do not believe it. Heck, mining companies don’t believe it. French investment and bullion bank Natixis tells BullionVault that producers are selling gold into the current surge.
Why? I’ll tell you why! Because a five-year bear market has crushed their hopes. They see a six-year downtrend looming dead ahead, and they are panicking.
But downtrends are made to be broken. Oh boy, are they.
The fact is, gold is making higher highs and higher lows. We HAVE hit peak gold production. Gold is so cyclical it should be in the Tour de France. And those cycles are gearing up. Way up.
Let me show you one more chart before I go. Showing that you haven’t missed the boat. It’s a chart of gold’s daily price action through Wednesday.
Sure, gold bulled through overhead resistance at $1,260. That resistance is now support. But there is even bigger resistance at $1,309.
Now, we might get there quickly. Recently, I told you just how quickly gold can fill an overhead gap in volume.
But gold might also zig-zag. The market causes the maximum amount of pain to the maximum number of investors — you know that. We could even see gold zag downward to test its recent uptrend before it really breaks you.
You know, in your gut, that such a dip would be a heck of a buying opportunity. But too many will listen to the sour grapes of Wall Street. It’s very hard to buy that kind of dip.
But if such a dip happens, those who do buy it could position themselves very nicely for gold’s next big bull move.
And when that happens, I have a select group of smaller gold and silver stocks. They’re overlooked by Wall Street. And they should shine very brightly indeed.
And that big rally is coming. Sour grapes be damned.
The Dow fell 138 points (-0.7%) after the U.S. dropped the "mother of all bombs" on an Islamic State target in Afghanistan. The 21,600-pound, GPS-guided, non-nuclear bomb was aimed at a cave and tunnel complex where ISIS fighters move freely. All sectors on the S&P 500 ended the day in the red.
• Saudis sell $9 billion in bonds: The first international sale of Islamic bonds saw five-year notes sold at 2.93% and 10-year notes at 3.65%.
• Adding to the case for rising rates: Weekly jobless claims dipped to 243,000 last week. (Economists expected 245K.) And producer prices saw their largest year-over-year increase in five years.
• Oil up 1.8% for the week: The Saudis continue to express interest in extending OPEC’s production-cut deal past the summer.
• Holiday weekend: Stock, bond and commodity markets will be closed tomorrow. European and Asian markets will also be closed Monday. However, the U.S. and Canadian markets will be back in business on Monday. And that’s when we will return with your next Afternoon Edition. So, let us take this opportunity to wish you a safe and happy long weekend!
Good luck and happy investing,
Uncommon Wisdom Daily