Friends
As we find ourselves in the middle of earnings season, the sloppiness that we anticipated is indeed occurring. Stocks such as Apple, IBM and Google have had fantastic earnings reports. On the other hand, bank earnings have been a bit of a mess and the shares of these companies have suffered this week. It feels like we are in a bit of a correction, but the numbers are so miniscule that it is really hard to tell. We have had the normal “sell the news” effect for many of the more high-flying companies that have reported, as often the good news is already priced in. This morning, futures look to be positive before the opening, so the 7 week winning streak may still be able to continue.
The bears keep on talking about the “overbought condition” of the market and the continuing concerns over China’s growth and Europe’s debt situation, but so far every dip seems to be met with bullish enthusiasm. It still feels like this market has left many behind trying to play “catch up”. The S&P 500 levels that we are watching are 1270 on the downside and 1290 on the upside. This morning’s futures look like we want to challenge that upside. If this was a pullback in the market, it wasn’t much and sure didn’t last very long. I still think that sloppiness will prevail for the next couple of weeks, as each earnings report is met with different reactions from shareholders. It serves investors to make sure one knows what one owns and why.
The U. S. economy continues to show signs of slight improvement, and that can actually be a good backdrop for stocks. A quickly heating economy would likely cause interest rates to rise quicker than desired, thus jeopardizing the bull move. A slow, deliberate improvement would allow the Fed to ease rates back up over time and keep the environment for stocks positive(the good ole Goldie Locks environment-i.e. not too hot and not too cold). Unfortunately, we are not alone in this world, and as investors we must be aware of what is going on overseas. Thus, the fuss all week about China and the continuing concerns over debt in Europe. Alas, knowing a company’s fundamentals is not enough in deciding what to own and when to own it. Oh, how I long for the good old days when bottoms up stock evaluation was all you needed to make investing decisions. Just a little more involved these days.
We’ll continue to monitor earnings season and macro events. Let’s see if the bears can muster a better effort, or are the bulls firmly in charge.
Have a nice weekend everyone.
