What will drive our economy through the end of the year?
The big topic today is the earnings reports. We believe these reports will drive the economy through the end of the year. Fifty-nine companies have reported so far from the S&P 500. Of those fifty-nine, 64% have beat estimates. Between now and the end of next week 278 companies will report. We still have a long way to go.
Earnings impact on your investments
Earnings of these companies are important to investors as it impacts their portfolio. If these companies continue to beat expectations, it will help individual’s investments. However, if they beat expectations we need to remember that these are based on lowered expectations. This means we could still see negative earnings growth. Companies could also be dumping all the bad news on one quarter for future quarter reports. This could impact the mood of the market and sentiment.
What we find most disturbing about the deficit
The news is filled right now with discussion concerning the debt ceiling and the deficit. While there is talk of the deficit going down, it is not near as good as it seems. The deficit is down $48 billion but that is statistically insignificant. Our debt to GDP is still at 73%. What we find most disturbing is that there is now a shift in the deficit more towards “gap filler” like Medicaid, Social Security and Entitlement. This is taking away from R & D, healthcare and military spending which has a positive multiplier affect throughout the economy.
The global economic slowdown
A lot of the volatility in the markets has been caused by the global economic slowdown, more specifically, what is going on in China. Last week China reported their GDP at 6.9%. They beat expectations of 6.8%, but it was the first time China reported their GDP below 7% since 2009. The question is, “What happens next?” Will they look a implementing more stimulus or continue to devalue their currency? If so, that will put more pressure on world trade. Countries that are dependent on their exported would be heavily impacted.
The changing energy sector
We are having major discussions about energy as OPEC will be having a meeting in December concerning cutting or continuing production. There is also debate within America about our energy policy. This could impact the markets and commodities.
Investors need to be aware of these topics so we are dedicated to keeping you up to date and giving you news before you hear it anywhere else. Please keep sending us your comments and questions.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
Stock investing involves risk including potential loss of principal.