By the time Halloween rolls around, we should be pretty well through earnings season. While I suspect we’ll have more treats than tricks, this time of the year is always just a little bit spooky.
A few materials and energy related holdings have already reported earnings and they have generally been on the weaker side. Given the slowing economy, these early reports make sense to us. Even though international markets are still generally robust, the slowing United States can’t help but have a dampening effect on most industry earnings.
The markets and in many cases, the stocks, however, haven’t responded too poorly on the downside, which once again suggests a decent amount of support in the marketplace. The rout in the bond markets over the summer, perhaps, may have some folks reconsidering the notion that fixed income is a safer place than equities.
Our portfolio has done extremely well in recent weeks as money has been gravitating to companies that are capable of demonstrating solid organic growth in a declining economic environment. Certainly, the highest growth names seem to be enjoying the greatest percentage gains, but even slower growers that are capable of demonstrating consistent growth are participating. While volumes are generally still lighter than normal, it doesn’t take much to get a once long forlorn area like growth moving again.
It’s been fun and I suspect the long term trends favoring growth will continue for quite some time. But I also happen to know that sentiment can change very quickly, often overnight as it did this summer. While earnings reports so far suggest that there is a lot of firepower waiting to buy the dips, and therefore, perhaps less downside than the summer months, I also know better than to believe these data points hook, line and sinker.
Always check your candy. Sometimes it’s got worms and on rarer occasions, razor blades. But most of the time, it’s just great stuff. Just don’t overdo it!
A few materials and energy related holdings have already reported earnings and they have generally been on the weaker side. Given the slowing economy, these early reports make sense to us. Even though international markets are still generally robust, the slowing United States can’t help but have a dampening effect on most industry earnings.
The markets and in many cases, the stocks, however, haven’t responded too poorly on the downside, which once again suggests a decent amount of support in the marketplace. The rout in the bond markets over the summer, perhaps, may have some folks reconsidering the notion that fixed income is a safer place than equities.
Our portfolio has done extremely well in recent weeks as money has been gravitating to companies that are capable of demonstrating solid organic growth in a declining economic environment. Certainly, the highest growth names seem to be enjoying the greatest percentage gains, but even slower growers that are capable of demonstrating consistent growth are participating. While volumes are generally still lighter than normal, it doesn’t take much to get a once long forlorn area like growth moving again.
It’s been fun and I suspect the long term trends favoring growth will continue for quite some time. But I also happen to know that sentiment can change very quickly, often overnight as it did this summer. While earnings reports so far suggest that there is a lot of firepower waiting to buy the dips, and therefore, perhaps less downside than the summer months, I also know better than to believe these data points hook, line and sinker.
Always check your candy. Sometimes it’s got worms and on rarer occasions, razor blades. But most of the time, it’s just great stuff. Just don’t overdo it!