Last night, I found my way back to Utah again, but I paid a price to get here. I crawled into bed just as my digital watch metaphorically struck the hour of 3:28 in the dark of the early morning. As I write this, it is but a mere four hours later, which makes this the bad news.
The good news is that because I was up so late, I listened at quite some length to the foreign financial news people and I remembered how in the bad old days of the financial crisis I stayed up late at night just so I could listen to those folks across the ponds in both directions. I stayed up late back then because their reporting is so much better than the breathless media reporting here in the US. The folks in foreign lands tend to stick to the facts, avoid sensationalism, and they don’t give much space to the doom and gloom crowd.
I also liked back then (and still do now – I just don’t stay up late to listen anymore) the heads up one gets on the US market when one listens live to the “action” of the foreign markets. I found then, as I do now, the correlation between markets quite helpful …
- Fourth-quarter earnings have mostly beaten expectations. Year-over-year profit growth for S&P 500 companies is now estimated at 5.6 percent, up from a January 1 forecast for 2.9 percent growth, and 70 percent of companies are exceeding analyst profit expectations, above the 62 percent long-term average, according to Thomson Reuters data.
As most always, life in the market is not as bad as the “predictors” predicted it would be. Earnings are better than expected and as I always say, earnings are what make the market go. Oh I know the bears are still fighting the tape, but it is what is and is, so go with it, make some money now, and then sit back when the market corrects a few percentage points, as we all know it will.
- My point this morning is exceptionally simple (if not overly simplistic in nature). For anyone believing that the market simply cannot go any higher, I suggest you study some history. Yes, stocks are due for a pullback. Nobody questions that from a near-term perspective. But the key from a big-picture perspective is to understand that times change and markets change. And with earnings at record highs, it would seem logical that stock prices might find their way to record highs at some point as well.
The above opinion supports my point, but it does so with a factual twist. The S&P earnings in 2012 are on pace to a higher high, and if they don’t get that high, they will certainly improve over the year before, as they did the year before that, and the year before that, and the year before that. The (E) below = Estimate and the E for 2013 projects an even higher high then 2012.
2007 $66.18
2008 $14.88
2009 $50.97
2010 $77.35
2011 $86.95
2012 $87.96 (E)
2013 $100.71 (E)
So, yes, a correction will come, but it might still be a little bit off, unless, of course, the world implodes or the US politicos come back next week and define a new “stupid” for behavior in Washington. If not, however, overbought and bearish sentiment aside, the market seems to want to go higher. Just think growth by accretion. Just think M&A. Just think about all the other positives out there.
Trade in the day; Invest in your life …
