Welcome Back!

I hope everyone had a great Fourth of July weekend. The early indications are that the market will rally today. Geez, it’s about time! Thanks to another dismal jobs report the S&P 500 closed Friday at 1,022 which was the lowest close since last September. For an economic recovery, ten months with no stock gains isn’t much of a recovery.
The good news is that earnings season will start next week. Aloca (AA) is usually the first major company to report and they’re scheduled to report next Monday. JPMorgan Chase (JPM) will report next Thursday and General Electric (GE) reports next Friday. Those are the early birds and they’ll give us an indication of how things will shake out.
I’m expecting pretty decent earnings growth for the stock market. For the second quarter of 2009, the S&P 500 earned $13.81 per share and I expect Q2 earnings for this year to be around $20 per share.
That may sound like tremendous growth but profits are really rebounding from very low levels. (very, very, very low levels).
Even though the economic recovery is proving to be rather weak, the past earnings have been so poor that it’s not to hard to show earnings growth coming off depressed levels. The S&P 500 will probably earn around $80 to $85 per share this year which means the market is currently going for about 12 to 13 times this year’s earnings. That’s just a guess but I think it’s a fairly reasonable one. This earnings season, many companies will give us a better idea of what to expect for the second half of 2010.
I continue to think that equity prices look good at this level, especially since you can’t even make 3% in a 10-year Treasury bond. The problem is that the market has been going down despite the low prices. As always, the market is in charge and we’re just following along.
Long for nice gains from AFLAC (AFL) and Medtronic (MDT). The Buy List has outperformed the S&P 500 for the last five sessions and eight of the last nine sessions.

Posted by on July 6th, 2010 at 7:35 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.