On this fine Monday morning, geopolitics slams the market, again, or so the media is suggesting. I am not sure why the news from either Ukraine or Gaza would be pushing the market down, as nothing is radically different this Monday morning as it was on Friday, Saturday, or Sunday. Innocent people are still dying in the process of stupid people killing each other over their political ideologies. Sad as it is, what else is news?
- Investors appear to focus on corporate earnings which continue to impress instead of uncertainty in both Ukraine and the Middle East.
Furthermore, from a financial perspective, why would the market care? Neither Gaza nor Ukraine matter in the financial world and, for that matter, Russia, other than it is a major oil and natural gas producer, is not a large factor either. Why then such a large swing in the market this morning from Friday?
I suspect I know an answer, but it is just a guess. Here it is. The buyers are holding back to see what happens with earnings and when buyers hold back in this unstable summer market, the sellers who believe the market is overvalued take advantage and sell.
Now, what has happened time and again is, as the selling dissipates on a given day, those buyers who are waiting for the dips begin buying slowly and steadily. This often brings the market off its lows, and, if the buying conviction is strong enough, the market ends up in the green. This morning, the market is behaving this way.
The fact is the market has no viable reason to tank. Yes, some money players react to the breathless media’s proclamations, and some selling occurs, and that will continue for the next month or so, but most of the money right now is not interested in Ukraine or Gaza; the buying money is interested in earnings.
- In addition, 68 percent of S&P 500 companies so far are beating analysts’ profit expectations, above the 63 percent long-term average, according to Thomson Reuters data. A similarly high percentage of companies are beating revenue forecasts.
There is plenty of talk in the financial media about better-than-expected earnings and about profits hitting above 6.5% on average, so enough folks are waiting to see if that is true. The next two weeks will tell the tale for the market.
- The next two weeks will see 60 percent of the S&P 500 release their results. That is key for investors looking for confirmation the anticipated economic rebound from the first quarter is more than just weather related.
The market is now some fifty-five points off its lows and just eight points below its high for today. It still has the opening gap down to face, but, as of now, the market is behaving accordingly, at least according to this writer’s mind, which, as far as I can tell, is no better or no worse than those other minds out there who look at an irrational entity and try to figure it out.
In the meantime, I am fairly confident the market has no reason to tank, no matter what happens in Gaza or Ukraine, other than any super military power entering the fray against another super military power, i.e., another world war. Speaking of irrational entities …
Trade in the day; invest in your life …
