Chairman Ben Bernanke’s signal that monetary policy will remain loose gave investors some confidence this week that no abrupt monetary policy changes will hinder the economic recovery. Following a run of upbeat U.S. economic news, largely related to housing and jobs, there had been talk in the markets that the Fed may soon put a brake on its super-easy monetary policy, which has boosted liquidity in financial markets over the past few years. The Fed is currently making $85 billion in bond purchases every month to encourage lending and spur the U.S. economic recovery. Continue reading
Monthly Archives: May 2013
Corporate Profits: With the US stock market reaching new highs, the debate is on as to whether the market will advance further or sees a correction as it did the last two times prices soared to record highs. It is very difficult to predict this market, but there are two important features of the current market environment that set it apart from the past two peaks in 2007 and 2000: corporate profits are much higher and investor sentiment is still somewhat pessimistic. The level of corporate profits today is estimated to surpass $110.00 for the S&P 500 vs. $84.00 at the peak in 2007. This gives the current rally more fundamental support for stock prices compared to the last two peaks. Strong corporate profits bode well for economic growth, specifically driving job creation, capital spending and technological innovation. Continue reading
There are two major developments in the U.S. that could prove to be “game changing” in the global economy. The first is U.S. energy exploration and the second is manufacturing investments returning to the U.S.
U.S. Energy Exploration:
For decades, the geopolitical leverage achieved by Mid East Countries (OPEC) has been a major challenge for the U.S. and its allies. Now, the growth of oil and natural-gas production from unconventional shale resources in North America is rapidly eliminating this threat, with positive geopolitical implications for the U.S. As political uncertainty continues across the Middle East, rising U.S. shale-oil production may become a more critical touchstone to market stability. In fact, the U.S. natural gas and oil boom could provide a significant boost to economic growth in the U.S. Continue reading
The markets kicked off the month of May with a strong start this week as earnings continue to exceed expectations. GM and Visa both reported and surpassed expectations for the quarter. However, corporate revenues are coming up short. In the first quarter, revenue is coming in 0.6% lower than in the year-ago period, down from the 0.9% growth expected at the beginning of the year. Fifty six percent have missed revenue estimates, making it the third quarter in the past four with more cases of revenue falling short than coming in better than expected. Much of the revenue weakness is hitting companies with a significant portion of their sales in Europe. Continue reading