Ho, Ho, Ho!
Early indicators are pointing toward another strong corporate earnings season for the ending fourth quarter of 2009. Contrary to fears, revenue growth is picking up steam. Don't count the consumer out yet, the Blizzard of 2009 notwithstanding.
As always, the question is: How much of this is already baked into stock prices?
Experts are predicting stronger than average GDP growth this quarter (3.7%) and preliminary estimates show that such rosy expectations may be justified. GDP forecasts indeed may be too low. Could we see a 4.4% GDP number?? A blowout quarter by the US economy would be welcome relief to many. However, the specter of higher interest rates would send stocks lower if GDP is overheating. The Federal Reserve would raise rates sooner to cool off the economy and protect against the threat of inflation.
At best, earnings match or slightly beat expectations and fourth quarter GDP (announced at the end of Janurary) comes in as forecast. No reason to suggest it won't. So stay invested and even overweight in stocks.
The next possible bump in the road will be the end of March when the Fed ceases making the market in mortgaged-backed securities (home loans). Will the private sector step in and take over? If not liquidity will dry up and the market will suffer. Stay posted.
Merry Christmas!
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