2013-02-27
In my travels there are a few things investors always ask me. They want to know whether I see any hurdles ahead for the economic expansion or the end to the stock market’s four-year rise. They ask about my expectations for corporate profits. But what they really want to know is when to get out of the market and when to get in. At MFS, we do not try to predict market moves or recommend that investors try to time the market. However, recessions and expansions are drivers of financial returns, and we want our investor base to know how the cycle is faring. So let me address the signs, patterns and events that might help investors identify a turning point in the current business expansion.
Strategist’s Corner: The sustainable cycle
In my travels there are a few things investors always ask me. They want to know whether I see any hurdles ahead for the economic expansion or the end to the stock market’s four-year rise. They ask about my expectations for corporate profits. But what they really want to know is when to get out of the market and when to get in. At MFS, we do not try to predict market moves or recommend that investors try to time the market. However, recessions and expansions are drivers of financial returns, and we want our investor base to know how the cycle is faring. So let me address the signs, patterns and events that might help investors identify a turning point in the current business expansion.
2013-02-20
As I now do each month, I am relaying some key findings from my research on corporate profits and the US economy in general. Given that we have just seen the end of 2012’s fourth-quarter profit reports, we have ample fodder to assess the state of the US corporation. The health of these corporations is one of the five areas of the US economy I analyze to find clues to its future direction. Regularly looking at these indicators has helped me create a standardized tool to measure profits and the economy. Using this tool, or scorecard, as I now like to call it, has helped me to weed out the politics and rhetoric from the basics of the business cycle. Here's a fresh look at where we are now:
Swanson's Scorecard
As I now do each month, I am relaying some key findings from my research on corporate profits and the US economy in general. Given that we have just seen the end of 2012’s fourth-quarter profit reports, we have ample fodder to assess the state of the US corporation. The health of these corporations is one of the five areas of the US economy I analyze to find clues to its future direction. Regularly looking at these indicators has helped me create a standardized tool to measure profits and the economy. Using this tool, or scorecard, as I now like to call it, has helped me to weed out the politics and rhetoric from the basics of the business cycle. Here's a fresh look at where we are now:
2013-02-14
Since the last recession, we have been arguing that demand deferred by companies and consumers is demand that does not go away; it will resurface again. Such demand is suppressed but can only be denied for so long.
In New England last weekend, we had a huge snowstorm by historic measures. By Sunday, the woods around my home were filled with cross-country skiers. Typically, after a snowstorm a few skiers appear, but not the hundreds I saw on Sunday. The trails were mobbed because we had been experiencing a virtual snow drought. Suddenly, when all this snow fell, all that pent-up demand erupted and skiers hit the trails.
Of snowstorms and pent-up demand
Since the last recession, we have been arguing that demand deferred by companies and consumers is demand that does not go away; it will resurface again. Such demand is suppressed but can only be denied for so long.
In New England last weekend, we had a huge snowstorm by historic measures. By Sunday, the woods around my home were filled with cross-country skiers. Typically, after a snowstorm a few skiers appear, but not the hundreds I saw on Sunday. The trails were mobbed because we had been experiencing a virtual snow drought. Suddenly, when all this snow fell, all that pent-up demand erupted and skiers hit the trails.
2013-02-12
Over the past couple of weeks, I have been helping a buddy of mine put together a workout routine that we hope will help him physically and mentally deal better with his kids, job and life. He has been at it for one month now, and the results are showing. He is stronger. The problems in his high-pressure job seem more manageable, and his heart rate is slowing. He has begun to turn his life around through discipline, hard work and persistence.
Fitness 101: A disciplined approach to financial and physical well being
Over the past couple of weeks, I have been helping a buddy of mine put together a workout routine that we hope will help him physically and mentally deal better with his kids, job and life. He has been at it for one month now, and the results are showing. He is stronger. The problems in his high-pressure job seem more manageable, and his heart rate is slowing. He has begun to turn his life around through discipline, hard work and persistence.
2013-02-07
We have had quite a run of corporate profitability in this cycle, which goes back to July 2009. Profits as a percentage of the US economy have grown to record levels, and profit margins in the Standard & Poor’s 500 Stock Index have sustained themselves at twice the long-term (50-year) average. These trends are quite important when you consider that since World War II, we have not experienced a recession during which profits and/or profit margins have been on the rise.
The skeptics have been saying that profits and margins are about to shrink back to long-term averages. I don’t think that is the case. In fact, I believe that the S&P companies will continue to generate better fundamentals — profits, cash flows, margins, etc. — for at least a good part of this year.
This profit story's not over yet
We have had quite a run of corporate profitability in this cycle, which goes back to July 2009. Profits as a percentage of the US economy have grown to record levels, and profit margins in the Standard & Poor’s 500 Stock Index have sustained themselves at twice the long-term (50-year) average. These trends are quite important when you consider that since World War II, we have not experienced a recession during which profits and/or profit margins have been on the rise.
The skeptics have been saying that profits and margins are about to shrink back to long-term averages. I don’t think that is the case. In fact, I believe that the S&P companies will continue to generate better fundamentals — profits, cash flows, margins, etc. — for at least a good part of this year.
2013-02-04
Fourth-quarter earnings season is about halfway through. Earnings of companies listed on the Standard & Poor’s 500 Stock Index are holding up, although we are not getting the robust surprises that we have grown used to throughout this recovery. With 34% of companies reporting as of 31 January, we have seen 65% of them reporting upside surprises.
Margins are also steady, and we are seeing the best results from the consumer staples, technology and health care sectors.
And the beat goes on
Fourth-quarter earnings season is about halfway through. Earnings of companies listed on the Standard & Poor’s 500 Stock Index are holding up, although we are not getting the robust surprises that we have grown used to throughout this recovery. With 34% of companies reporting as of 31 January, we have seen 65% of them reporting upside surprises.
Margins are also steady, and we are seeing the best results from the consumer staples, technology and health care sectors.
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