I love the ‘Lowering of Expectations Season’ which precedes the release of corporate earnings. It gives those of us who are bullish the ability to use market needed drawdowns - such as the 4% pullback we experienced - as a way to add to profitable positions and shake out the weak longs.
For the last few years, ever since Sarbanes Oxley was introduced into the capital market structure a decade ago, companies have ‘lowered expectations’ with vigor in order to avoid the perception of a violation of the rules. It’s a pattern that has repeated itself quarter after quarter.
Unfortunately it keeps money on the sidelines at the worst possible time. Worse yet, people find themselves in investments which are immediate losers. Buying a 10 year bond that yields 1.95% with inflation (As measured by CPI) at 2.9% is all risk and no return.
Even with the remarkable performance of the various indexes since Q4 of last year, stocks are still undervalued. This is NOT a ‘sell in May and walk away’ market. This is a May to buy some added protection and watch the market go higher. There are four fundamental reasons to stay invested:
In spite of the lack of pro growth, anti business policy being dished out of DC by my fellow Chicagoan, corporate America is stronger than it has ever been. Earnings don’t lie and this earnings season should tell investors that the story behind the rally in US stocks is better than expected.
As a product of the Reagan era it’s easy to imagine how much higher stocks would be if government helped business in America flourish instead of becoming an obstacle to growth. But, as I was always taught by my optimistic Armenian mother, this too shall pass.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for August 27th, 2014 | John Ransom
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Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for August 25th, 2014 | John Ransom
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