The fourth quarter of 2016’s earnings season kicked off as several of the S&P 500’s Financials sector reported earnings on Jan. 13, 2017. S&P 500 2016 Q4 earnings are expected to increase 6.2% from the prior year. If this holds, it will be the highest since the 7.0% posted in 2014 Q4. This will be the second quarter of positive year-over-year earnings growth, solidifying that the earnings recession that started in the third quarter of 2015 is over. Exhibit 1. S&P 500 % Change in 16Q4 Blended Earnings Nov. 1, 2016 to Jan. 13, 2017 by Industry Group Source: I/B/E/S

Semiconductors tend to be a leading indicator for technology as they effectively supply the components that allow for many modern day innovations. The semiconductors and semiconductor equipment industry has had a strong 2016, which is likely an indication that growth will flow through to other industries. However, given the industry’s massive growth along with its historical cyclicality, investors are closely monitoring sentiment along with earnings to determine if the cycle has peaked. Let’s review some of Thomson Reuters’ predictive analytic models using Micron Technologies Inc. (MU.O) as an example to show how sentiment can enhance the ability to navigate this