Wednesday, October 24, 2012

Stock Market: Why This Earnings Season Is Encouraging!

The stock market is singing the blues again. "Concern about a worsening of the earnings picture has sent the S&P 500 down 3.5 percent from this year’s high on Sept. 14", writes Bloomberg (bloomberg). They also report, that "earnings at about 70% of the index’s companies beat analysts’ estimates", but "third-quarter sales missed forecasts at 60% of companies" (bloomberg). It looks like  the investors are focusing on the bad revenue numbers and ignore the profits. "Weak earnings spark selloff", comments the Wall Street Journal (

I reckon that this is a misjudgment and could lead to a (positive) correction in the coming weeks. The solid numbers of earnings beats shows that the S&P companies are still very efficient and productive. They manage to generate solid profits in spite of the sluggish global economy! When the world economy has overcome its weak phase this efficiency should lead to a strong profit growth again and hence generate remarkable gains on the stock market.

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