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More on the vastly lowered expectations for Q1 earnings growth in S&P 500 (NYSEARCA:SPY) in this WSJ story. We can see how far expectations for the quarter have dropped since October even as the stock market has surged. Usually you’d want price and earnings growth to be going in the same direction. Now to be fair, back in September/October the thought process was Europe was going down the toilet AND the U.S. had a great chance of recession, but strangely as both those were put off the table, earnings expectations DROPPED. You’d think it would be the opposite no?
Please keep in mind this estimate of almost no growth in the S&P 500 (NYSEARCA:SPY) in Q1 includes Apple (NASDAQ:AAPL) – so you can see the S&P 499 (ex 1) is going to face a struggle. It is also key to remember this data when the breathless anchors on financial infotainment declare “so and so company beat expectations by X%!!!”. Yes the much lowered expectations of March… not the ones from September/October.
(Too early to talk about it, but the real earnings bubgaboo is Q4 – analysts have completely backloaded the year’s EPS growth into Q3, and especially Q4 – apparently we’re going to see 4-5% GDP growth starting in October if you believe this bottoms up analysis!)
U.S. multinational profits have been warmed by a potent cocktail of emerging market growth, global labor and tax arbitrage (including firing many U.S. workers), massive government deficit spending (esp. in China and the U.S.), and the like. Many of these tailwinds have slowed considerably….
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). Trader Mark also authors the blog Market Montage.
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