Market Focus
for the week ended December 19th, 2014
Market Focus:
The major markets in the U.S. rallied an average of over 3.00% last week, with the DJIA finishing the week +3.04% while
the S&P 500 finished +3.43%. The best performing index was the Russell 2000 up 3.80% on the week. This was one of
the best market rallies since March 2009.
Part of the markets turnaround was the announcement made by the Federal Reserve, stating that the pace of rate
increases would be gradual and slow, with the federal funds rate projected at 1.125% and 2.5% by year-end 2015 and
2016. The U.S. Indices are making a recovery coming close to regaining the losses from the previous week that occurred
and are back within range of record highs. In addition to the Federal Reserve announcement the market digested good
overall economic reports; such as the leading economic index and CPI report that that showed little to no inflation risk.
Among the stronger performing sectors, energy was the strongest this past week posting its biggest gain in over 3 years;
partially due to the price of oil having its first two consecutive day rally since November. Corporate updates have had
relatively little if no effect on the markets, despite many posting lower than anticipated returns. Global markets seemed
to have been struggling due to economic influences within their countries and regions, but saw a similar gain
Wednesday through Friday as U.S. markets did.
Economic Focus:
US economy is strong overall, but showing some signs of slowing
 Initial claims seasonally adjusted number was 289,000 which had a 6,000 decrease in benefit claims.
 The Conference Board’s leading economic index rose 0.6% in November after a 0.8% climb in October.
 US factory output rose 1.1% in November after an upward revised gain of 0.4% in October.
 Markit’s flash US manufacturing purchasing managers’ index fell to 53.7 in December from a final reading of
54.8 in November.
 US consumer prices fell in November by a seasonally adjusted 0.3% from October, the largest one-month drop
since December 2008. Core prices without food or energy rose 0.1%. Year to year, prices rose 1.3% overall.
 US housing starts fell 1.6% in November, while housing permits fell 5.2%. Homebuilder confidence has slipped to
a seasonally adjusted 57 in December, down from 59 in September, which was its highest point since 2005.
 Industrial production rose +1.3% vs. expectations for a +0.7% increase – the +1.3% gain was the biggest monthly
increase since May 2010.
All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC,
NCUSIF or any other agency. Portions of this newsletter were prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities, Harvest Investment Services, LLC, or Teboda & Associates. Advisory Services offered through Harvest
Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC, Harvest Investment Services, LLC and Teboda & Associates are
independent of ProEquities, Inc.
Upcoming Economic Focus:
Each week there are numerous economic reports that are released. Some of the reports are very important and will
move the market, while others are minor in stature. We have highlighted some of the important economic reports that
will be released this upcoming week.
Release
Date
Briefing.com Consensus
GDP – Third Estimate
December 23rd, 2014
4.2%
Michigan Sentiment - Final
December 23rd, 2014
93.8
PCE Prices – Core
December 23rd, 2014
0.1%
MBA Mortgage Index
December 24th, 2014
N/A
Initial Claims
December 24th, 2014
290K
Table 1: Briefing.com
Earnings Focus:
The third quarter earnings within the S&P 500 - 499 companies have reported earnings for the third quarter, 74% have
reported earnings above analyst expectations. This is above the long-term average of 63% and is slightly above the
average over the past four quarters of 67%. Furthermore, 59% of companies have reported Q3, 2014 above the average
analyst expectations over the past four quarters. The estimated earnings growth rate for the S&P 500 for Q3 2014 is
10.4%. When you examine the individual sectors, nine of the ten sectors are estimated to report a year-over-year
increase in earnings for the third quarter. The Materials, Health Care, and Financials sectors have the highest earnings
growth rates for the quarter, while the Consumer Discretionary sector has the weakest anticipated growth.
The S&P 500 revenue growth is estimated to grow by 4.1% for the quarter. The Healthcare sector is expected to have
the highest estimated revenue growth rate while the Energy sector is expected to have the lowest. The forward looking
P/E ratio for the S&P 500 is 16.7 above the fifteen year average of 16.0.
FedEx earnings miss mark
Shipping giant FedEx posted increases in profit and revenue from a year ago, along with better profit margins, but
missed expectations in both earnings and revenue. Though the firm benefited from lower fuel prices, high aircraft
maintenance expenses hit its bottom line in the quarter ended in November.
General Mills sales fall
Packaged food firm General Mills reported a drop in sales, as the US food industry remained weak and growth slowed in
emerging markets. Overall, sales fell below analysts’ expectations. General Mills has attempted to boost profits by
cutting costs — closing factories, eliminating jobs and scaling back production to reflect lower consumer demand.
Yahoo Finance, Thomson Reuter, First Trust, & MFS
All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC,
NCUSIF or any other agency. Portions of this newsletter were prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities, Harvest Investment Services, LLC, or Teboda & Associates. Advisory Services offered through Harvest
Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC, Harvest Investment Services, LLC and Teboda & Associates are
independent of ProEquities, Inc.
Market Momentum Focus:
One important aspect to the Harvest Focus is that it will provide you with key information about how various sectors
and asset classes are trending relative to one another and also to the broad market. The Market Focus will help you
better understand the momentum investment approach utilized by the AlphaSolutions strategies that we employ to
help you “Harvest Gains and Limit Losses”. It will also help demonstrate our rules based investment approach of why
specific positions were purchased or held onto and why others were sold. We have highlighted a few of the significant
changes from a week ago. Real Estate moved up 3 spots and SmallCap Blend moved up 4 spots. However, the LargeCap
Value fell 7 spots and Industrial sector fell 6 spots.
Figure 1 Source: W E Sherman & Co, LLC
All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC,
NCUSIF or any other agency. Portions of this newsletter were prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities, Harvest Investment Services, LLC, or Teboda & Associates. Advisory Services offered through Harvest
Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC, Harvest Investment Services, LLC and Teboda & Associates are
independent of ProEquities, Inc.
The Big Picture:
The “big picture” is the months-to-years timeframe; i.e., the timeframe in which Cyclical Bulls and Bear
operate. Below is a snapshot of the current indicator statuses we closely watch for broad market direction:
Figure 2 Source: W E Sherman & Co, LLC
US Bull-Bear Equity Indicator this week is 62.30 which is higher than last week’s 62.04, and is still in bull
territory. This is a longer term (months to years) indicator for the market direction and is used to establish the equity
allocation in many of our Alphasolution’s strategies.
Figure 3 Source: W E Sherman & Co, LLC
All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC,
NCUSIF or any other agency. Portions of this newsletter were prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities, Harvest Investment Services, LLC, or Teboda & Associates. Advisory Services offered through Harvest
Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC, Harvest Investment Services, LLC and Teboda & Associates are
independent of ProEquities, Inc.
Personal Wealth Enhancer Tip of the Week:
We understand that just because “the shoe fits” it
might not be your “style” or might be for the wrong
occasion, or might even be uncomfortable. Take, for
example, a pair of neon orange gym shoes – although
they may fit, it doesn’t mean that you would want to
wear them. Even if you did like them, maybe you
wouldn’t want to wear them to, say - a fancy dinner.
The same goes for your Financial Advisor. You may find
someone or something that “fits” your needs but still
isn’t what you are looking for. Maybe you don’t like their strategies, or you don’t feel comfortable, or they
simply aren’t what you need right now. We strive to be the “perfect pair of shoes” for you and we hope this
video enlightens you on how we strive to accomplish this goal. The video also illustrates the journey of our
“shoes” and what it’s like to walk in them, giving you an insight into our world. Click here to watch the video.
Click here to watch an audio-video track with Tim Newell, Mike McClelland and Larry Chapel on WYLL. This
audio-video track highlights “7 401(k) Questions to Ask Yourself” and offers possible solutions to these
questions.
Sources Include (but are not limited to): The Sherman Reports, First Trust, Yahoo, MFS & Thomson Reuter
All investments involve risk, including loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC,
NCUSIF or any other agency. Portions of this newsletter were prepared by W E Sherman & Co., LLC. W E Sherman & Co., LLC is not affiliated with ProEquities, Harvest Investment Services, LLC, or Teboda & Associates. Advisory Services offered through Harvest
Investment Services, LLC, a Registered Investment Advisor. Securities offered through ProEquities, Inc. A Registered Broker-Dealer and Member FINRA and SIPC. Harvest Financial Planning, LLC, Harvest Investment Services, LLC and Teboda & Associates are
independent of ProEquities, Inc.