It’s a boom time for doomsayers according to the cover of Barron’s and such paranoia-inducing prognostications are only going to get bolder, and more frequent, thanks to the fact that billionaire George Soros’ hedge fund firm has increased its bearish bet on stocks – a put position on the S&P 500 Index – by a staggering 154% in the most recent quarter…accounting for 11.13% of his holdings…implying that the stock market is headed for a nasty fall. The efforts of the doom-and-gloom crowd to try and scare you stockless aren’t going to succeed this time, though, and here’s why.
[The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Basenese goes on to say in further edited excerpts:[That’s right,] the efforts of the doom-and-gloom crowd to try and scare you stockless aren’t going to succeed this time…[though because,] after throwing an emerging markets-inspired temper tantrum in January, U.S. stocks are back in rally mode. Consider: The Nasdaq just hit a new all-time high, thanks to a seven-day winning streak. The Dow and S&P 500 Index are within striking distance of hitting highs, too. t some dead cat bounce, either. The rebound is legitimate.
How can I be so sure?…[Because] stocks are starting to trade based on the underlying strength in earnings. With nearly 90% of S&P 500 companies reporting results, fourth-quarter profits are on track for a 9.3% increase, according to RBC Capital Markets. That’s three full points higher than analysts expected and this solid outperformance materialized over the last two weeks, as well, which coincides with the market turnaround…
It’s not just earnings that are surprising to the upside. Sales figures are coming in uncharacteristically strong, too…In terms of quantifying the sales strength, Bespoke Investment Group captures it best, reporting that the revenue “beat rate” – the percentage of companies reporting better-than-expected sales figures – rests at 64.1%. It’s been ages since we’ve witnessed such a high reading. Not since the second quarter of 2011, to be exact.
What’s more, we could be in store for even stronger sales growth because analysts currently estimate that sales for S&P 500 companies will come in at 1.1 times the GDP growth rate this year. Historically, however, sales rise about 2.5 times faster than GDP, according to Bloomberg so the current sales estimates are way too low, and we all know what happens when companies beat expectations, stocks rise.
Bottom line: For corporate profits – and, in turn, stock prices – to keep climbing, sales need to start growing – and that’s finally happening. (Sorry, doomsayers.)
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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