The financial markets have been on a tear in recent weeks, topped by an above 15,000 point close for the blue-chip Dow Jones Industrial Average this past week. Bob Williams, Managing Director for Little Rock-based Delta Trust Investments, says he doesn’t expect the trend to change dramatically.
“If I had to make a guess, I’d say we’re more likely to see some consolidation, but no signs that there’s going to be a tremendous mass sell-off in the foreseeable future,” Williams said in a recent Talk Business Arkansas interview.
He said that strong earnings reports and steady federal monetary policy has contributed to the bull run.
“Thus far in the quarter nearly 450 of the 500 companies in the S&P 500 have released earnings results. Two out of three are beating earnings per share results so that’s a very pleasant and good surprise. The markets are reacting favorably to that,” said Williams.
He also noted that nearly half of the firms reporting earnings are missing revenue estimates, but cost controls are exceeding that slip and leading to better corporate profitability.
Williams also said that another factor easing market volatility is a multi-year shift that has diminished money manager influence.
“I’m always hesitant to say that things have changed,” said Williams. “You look back 20 years ago, you had the defined benefit plan or retirement plans, which were the pension plans. Today, you have the defined contribution plans, the 401(k) plans that are being funded by individuals, and the difference is that the pension plan monies were controlled by money managers that tended to try to outperform the market and they tended to move large sums of money in and out of the market frequently.
“Now you have individuals who at most once a year set their allocation for their retirement plan money, and maybe every five to ten years move that money around and change how it’s invested,” said Williams.
You can catch his full interview in the video below.