Earnings Up, Growth Accelerating
Earnings & Confidence
One of the themes throughout the year so far has been the recession of confidence. We are now starting to see that confidence come back. While you may be seeing and hearing a lot of negative things in the news media today, there actually is a lot of positives occurring behind the scenes.
Since the beginning of the year we have been looking at how earnings can be a key component. So far we are liking what we are seeing. Earnings, so far, following the first quarter are tracking for a 14.7% increase year-over-year. Since last year we have been saying that it’s important to have strong corporate earnings and for corporate guidance going forward to be positive. While there is so much uncertainty in D.C. with political risk, as long as we continue to have good earnings, we are on track for some great things.
Earnings reflect stock prices, that’s how it works. One of our concerns in 2016 was that corporate earnings weren’t going up. With the tight trading range we have had the last couple of weeks with all the risk focused elsewhere, earnings are holding up.
GDP & Acceleration
The GDP (Gross Domestic Product) looks like it’s accelerating into the second quarter, which could be on track to have the best quarter since 2014. The Federal Reserve Bank of Atlanta is forecasting about a 3.6% rise. Since the economy is growing, earnings could have a better chance of rising with consumer spending. Three important things to look at when discussing consumer spending are wealth, income, and how much they are able to borrow.<
Part of the reason the first quarter was down was that borrowing was down, so once this improves a little bit that can help re-accelerate. One of the areas where borrowing has been up is auto loans, but it is also starting to improve in other areas..
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