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Corporate Earnings Season Expected To Be The Worst Since 2009
FYI: As the fourth-quarter earnings season kicks off this week, results for S&P 500 companies are expected to show a decline in profits for a third quarter in a row, confirming that corporate America has slipped into an earnings recession. Regards, Ted http://www.investmentnews.com/article/20160114/FREE/160119959?template=printart
Folks, I am an average retail investor now retired from the full time working world with a degree in economics a long with being a former corporate credit manaer of a sizeable distribution company located in the Carolinas. I have also worked some in the banking and financial markets. In order for me to obtain my degree I had to do some research work from time-to-time and write papers on these findings and my studies. Sometimes, the news media will put spin on things where they don't appear to be fully stated as they really are or present the full story.
My current study and findings indicate that 4Q2015 earnings will indeed be down year-over-year ... but, ahead of 3Q2015 earnings. And, they continue to improve as we move through the year. Will we reach new highs? Perhaps, as I am looking for a high on the S&P 500 Index somewhere around 2140 this year. Where will it close? Your guess is as good as mine.
With this, Old_Skeet does not feel the sky is falling as it fell sometime ago. I find it interesting that the markets are just now adjusting to a fallen sky. Many say the markets are forward looking. So look at it this way ... earnings are projected to improve as we move through the year and I am thinking the markets will follow and move upward along with the anticipated improvement in earnings.
I am a buy and hold investor, for the most part, with a little trading done on the side from time-to-time. It's the traders that are following the technicals and are moving to cash while a long term buy and hold investor, like myself, are looking for new opportunity while prices are in decline. Can prices move lower? Yes, indeed thay can. But, over time the long term trend is to move higher.
I am staying invested within my asset allocation believing things are going to improve. For the long term investor the time to build cash was sometime ago when prices were elevated as we kept making new 52 week highs. I am thinking now is the time, for me, to be buying. My stratgey is to average in once a ten percent decline has been reached at predetermined buy steps and average in as the market declines. I bought at 1922 and plan to buy again around 1870 and thereafter about every 50 point drop until the market bottoms and then I'll make another one or two buys on the way back up until I am about one or two buy steps form my average buy mark.
Once the markets have recovered and my equities have appreciated in value with my allocation to equities growing and as they reach the upper range within my asset allocation I'll begin to trim my equity position, thus a rebalance, rasing my allocation to cash or bonds. Usually the stock market falls much faster than it recovers so this strategy could take a few years of time to cycle and go from valley to peak.
@Old_Skeet, very wise indeed on buy and hold. Probably want to wait a bit until the dust settle. I rebalanced last fall and have not made sizable move in the asset allocation.
"For the long term investor the time to build cash was sometime ago....".
I disagree.
If we are in a bear market, and I believe we have been in one for the past six months and it is now accelerating to the downside, we have quite a ways to go. If recent past is prologue and we look at peak-to-trough declines in the last three bear markets (1973-1974, 2000-2002 and 2007- 2009) the S&P 500 will have a peak-to-trough decline somewhere between 35% to 50% from its peak of 2130. That suggests - if this is a bear market - if will bottom somewhere between 1070 to 1385. If that sounds ridiculous to anyone, so be it. Then again, S&P 666 would have sounded equally ridiculous to everyone in September 2007.
My point: it is not too late to raise significant amounts of cash if you believe we are in a bear market. In fact, since we are only 12.2% off of the S&P 500 high of 2130 as I type this (currently S&P 1873) you will actually be relatively early.
"For the long term investor the time to build cash was sometime ago...."
.
I don't think we are anywhere near 2000-2002 or 2007-2009 economic conditions or bubbles. So old_skeet, I also think the time to sell has past. If you are uncomfortable, lighten up a little. But where is the evidence of another great recession? Not that the market can't go down another 10%, but 30-50%, well the odds of another great recession are small IMHO. We have been long over due a major correction. So here it is! This isn't a surprise.
Old skeet, very nice post. I love that you have a system that has proven well for you.
Bear markets ALWAYS begin well before it is recognized that we are in a recession. In fact, by the time it is officially classified as a recession we are usually at the tail end of a bear market. If one waits for the experts, economists and pundits to declare that we are in a recession before adjusting one's portfolio it is always too late. The market action is better in identifying recessions.
FWIW, my guess is that we are indeed in a recession and the market behavior beneath the Dow and S&P 500 indices from June through December 2015 suggest same. The collapse of the commodity markets and the Dow Jones Transportation Average, which is now officially in bear market territory ( - 28% ) also suggest this. Put succinctly: it was too hard to make too little money in the market over the last six months of 2015.
Put yet another way, the risk:reward ratio has been asymmetrically skewed to the downside, heavily so. Good individual stock selections - stocks that reported solid earnings with positive guidance "popped" about 5% to 8% and promptly gave up those gains in the next 1-2 weeks. Conversely, stocks which missed their anticipated earnings by a slight amount and/or gave lukewarm or poor guidance promptly shed 10% to 15%. Stocks which badly missed earnings and gave poor forward guidance were crushed, losing 20% to 40% and they have not recovered.
I may be wrong (and I frequently am ) but the market action over the last six months suggests that this is a hostile environment for investing and my guess is that the market is being (typically) prescient in indicating that we are in a recession. This is certainly not as severe as the financial crisis of 2007 to 2009 but it doesn't need to be to wreak significant havoc in the major stock market indices and one's portfolio, especially after a 7-yr. bull market that took the S&P 500 from 666 to 2134 peak-to-trough (320% gain).
One of the great things about the stock market is that there is no one right way, or wrong way, to play it. In reading through the comments in this one post alone one can find differences of thought. What works for one investor might not work for another because their portfolio's are based upon different styles, strategies and synergies.
And, that is what makes this board so great ... the sharing of different thoughts and ideas.
There use to be a thread that @Scott would post and anchor. It was titled "What are you Buying, Selling or Pondering?" A great thread indeed by my thinking. I am of great hopes that it will soon return ... along with Scott ... or perhaps with another person to anchor it and bring it forward from time-to-time. I do not want to hijack Scott's thread and hope others will be contacting Scott to encourage him to post more often rather than just lurking. And, if there are reason(s) he can not devote the time and engery to anchor the thread perhaps he will express his wishes as how he would like to see the thread managed going fordward.
I'd sincerely like to see the thread restored ... but, will not do so unless he green lights it.
Old_Skeet couldn't agree more about different strokes for different folks. In that vain I thought that buying/selling thread was inane. We don't even want to go there here. I will message you after my hike today about that. I am real old school. I believe in validation of claims/results etc. Just recently I got into it with someone I thought was a Pretender. I gathered up my last 23 years of 1040s to validate myself. But that too is a story for another time.
Comments
Folks, I am an average retail investor now retired from the full time working world with a degree in economics a long with being a former corporate credit manaer of a sizeable distribution company located in the Carolinas. I have also worked some in the banking and financial markets. In order for me to obtain my degree I had to do some research work from time-to-time and write papers on these findings and my studies. Sometimes, the news media will put spin on things where they don't appear to be fully stated as they really are or present the full story.
My current study and findings indicate that 4Q2015 earnings will indeed be down year-over-year ... but, ahead of 3Q2015 earnings. And, they continue to improve as we move through the year. Will we reach new highs? Perhaps, as I am looking for a high on the S&P 500 Index somewhere around 2140 this year. Where will it close? Your guess is as good as mine.
With this, Old_Skeet does not feel the sky is falling as it fell sometime ago. I find it interesting that the markets are just now adjusting to a fallen sky. Many say the markets are forward looking. So look at it this way ... earnings are projected to improve as we move through the year and I am thinking the markets will follow and move upward along with the anticipated improvement in earnings.
I am a buy and hold investor, for the most part, with a little trading done on the side from time-to-time. It's the traders that are following the technicals and are moving to cash while a long term buy and hold investor, like myself, are looking for new opportunity while prices are in decline. Can prices move lower? Yes, indeed thay can. But, over time the long term trend is to move higher.
I am staying invested within my asset allocation believing things are going to improve. For the long term investor the time to build cash was sometime ago when prices were elevated as we kept making new 52 week highs. I am thinking now is the time, for me, to be buying. My stratgey is to average in once a ten percent decline has been reached at predetermined buy steps and average in as the market declines. I bought at 1922 and plan to buy again around 1870 and thereafter about every 50 point drop until the market bottoms and then I'll make another one or two buys on the way back up until I am about one or two buy steps form my average buy mark.
Once the markets have recovered and my equities have appreciated in value with my allocation to equities growing and as they reach the upper range within my asset allocation I'll begin to trim my equity position, thus a rebalance, rasing my allocation to cash or bonds. Usually the stock market falls much faster than it recovers so this strategy could take a few years of time to cycle and go from valley to peak.
"For the long term investor the time to build cash was sometime ago....".
I disagree.
If we are in a bear market, and I believe we have been in one for the past six months and it is now accelerating to the downside, we have quite a ways to go. If recent past is prologue and we look at peak-to-trough declines in the last three bear markets (1973-1974, 2000-2002 and 2007- 2009) the S&P 500 will have a peak-to-trough decline somewhere between 35% to 50% from its peak of 2130. That suggests - if this is a bear market - if will bottom somewhere between 1070 to 1385. If that sounds ridiculous to anyone, so be it. Then again, S&P 666 would have sounded equally ridiculous to everyone in September 2007.
My point: it is not too late to raise significant amounts of cash if you believe we are in a bear market. In fact, since we are only 12.2% off of the S&P 500 high of 2130 as I type this (currently S&P 1873) you will actually be relatively early.
I don't think we are anywhere near 2000-2002 or 2007-2009 economic conditions or bubbles. So old_skeet, I also think the time to sell has past. If you are uncomfortable, lighten up a little. But where is the evidence of another great recession? Not that the market can't go down another 10%, but 30-50%, well the odds of another great recession are small IMHO. We have been long over due a major correction. So here it is! This isn't a surprise.
Old skeet, very nice post. I love that you have a system that has proven well for you.
Bear markets ALWAYS begin well before it is recognized that we are in a recession. In fact, by the time it is officially classified as a recession we are usually at the tail end of a bear market. If one waits for the experts, economists and pundits to declare that we are in a recession before adjusting one's portfolio it is always too late. The market action is better in identifying recessions.
FWIW, my guess is that we are indeed in a recession and the market behavior beneath the Dow and S&P 500 indices from June through December 2015 suggest same. The collapse of the commodity markets and the Dow Jones Transportation Average, which is now officially in bear market territory ( - 28% ) also suggest this. Put succinctly: it was too hard to make too little money in the market over the last six months of 2015.
Put yet another way, the risk:reward ratio has been asymmetrically skewed to the downside, heavily so. Good individual stock selections - stocks that reported solid earnings with positive guidance "popped" about 5% to 8% and promptly gave up those gains in the next 1-2 weeks. Conversely, stocks which missed their anticipated earnings by a slight amount and/or gave lukewarm or poor guidance promptly shed 10% to 15%. Stocks which badly missed earnings and gave poor forward guidance were crushed, losing 20% to 40% and they have not recovered.
I may be wrong (and I frequently am
One of the great things about the stock market is that there is no one right way, or wrong way, to play it. In reading through the comments in this one post alone one can find differences of thought. What works for one investor might not work for another because their portfolio's are based upon different styles, strategies and synergies.
And, that is what makes this board so great ... the sharing of different thoughts and ideas.
There use to be a thread that @Scott would post and anchor. It was titled "What are you Buying, Selling or Pondering?" A great thread indeed by my thinking. I am of great hopes that it will soon return ... along with Scott ... or perhaps with another person to anchor it and bring it forward from time-to-time. I do not want to hijack Scott's thread and hope others will be contacting Scott to encourage him to post more often rather than just lurking. And, if there are reason(s) he can not devote the time and engery to anchor the thread perhaps he will express his wishes as how he would like to see the thread managed going fordward.
I'd sincerely like to see the thread restored ... but, will not do so unless he green lights it.