Daily Gains Letter

inflation corporations


Three Reasons Why This Stock Market Can Accelerate on Bad News

By for Daily Gains Letter | Apr 18, 2013

180413_DL_clarkIt’s now the avalanche of corporate earnings season, and so far, it’s not too bad.

There are going to be disappointments. And there will be even more disappointments. But on balance, I don’t care what anybody says; in the U.S. economy and the global economy, any growth is good.

The stock market is going to go where it’s going to go, but the most important factors are the earnings, revenues, balance sheets, and corporate outlooks.

Here’s why the stock market can go higher:

Investor Sentiment

Institutional investors have money that needs to go to work. Money is flowing back into the stock market, and investors don’t pay fund managers to sit on cash. Fund manager BlackRock, Inc. (NYSE/BLK) announced very good first-quarter earnings and net new inflows of funds grew to $39.4 billion, of which $33.7 billion was for the stock market.

Corporate Earnings

It’s early, but earnings last quarter weren’t bad for a lot of companies, and blue chips all around are reporting growth. Certainly, not every company is going to meet or beat earnings expectations, but when you have a mature corporation like Johnson & Johnson (NYSE/JNJ) report first-quarter revenue growth of 8.5% (10% if not for the stronger dollar), that’s impressive in the global economy. Lots of other blue-chip companies are reporting solid numbers—numbers that have beat expectations. The numbers aren’t perfect in large-cap technology, but old economy companies are holding up, as are most banks.

The Fed and Interest Rates

The Federal Reserve is absolutely committed to reinflating assets. It’s been doing this for some time now and, according to the stock market, it’s working. But … Read More