We're in a period of major uncertainty among investors. Half believe the glass is half empty and point to high unemployment, excessive government stimulus (debt) and low consumer confidence. The other half note rising corporate profits, growth in consumer spending and undervalued assets.
For now, I remain in the bullish (optimistic) camp. What's going to drive short term results? Earnings, earnings, earnings! Alcoa is scheduled to kick off earnings season next week and I believe attention will shift from jobs to corporate profits. If my forecast is correct, we're in for another barn burner of an earnings season with profits generally topping forecast. Better still, we'll see growth in consumer spending, which has been weak thus far.
Economists have already boosted GDP forecasts for the fourth quarter (ended Dec. 31) to 4.5%. The key is how much of that figure is generated by the government versus Jack and Jill consumer. My guess is not as much as the naysayers think. Equities will outperform other asset classes in the short-term. I'm sticking with iShares S&P 500 Growth Index IVW as my pick for the quarter.
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