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Yes, reports on retail sales, jobs, inflation and manufacturing in the very recent past have missed expectations. That’s why the Atlanta Fed Model depicts a paltry 0.5% growth rate. But I sure wouldn’t worry about a recession yet.
This first quarter weakness, in my opinion, is just a wait-and-see by purchasing managers and businesses. They’re waiting for clarity on taxes and political reforms, and geopolitical tensions aren’t helping. But those fears should be short-lived, and things will get back on track. Indeed, markets have shown time and again that unless we’re in for an all-out World War against the likes of a China or a Russia, the economy will continue to chug along, and our markets will do so right alongside.
Meanwhile, I’ll keep my eyes on earnings as the primary determinant of whether this market can still continue to go higher – and on that front, things look good …
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| Data: FactSet Research |
First-quarter earnings are expected to have risen 6% at companies with mostly U.S. exposure, and almost 16% for companies with more exposure to overseas markets. Those growth rates give pretty strong underpinnings to the corporate sector, and aren’t hinting at a recession anytime soon. It’s nice that we live in a country that benefits from different cylinders to keep our engine running: When the rest of the world is suffering, we can rely on our internal industries to carry us through, and when we’re struggling, the rest of the world supports us.
So for now, focus on earnings, don’t worry about a recession from close calls in questionable Fed forecast models, and give the economy a chance to do what it has continually done for the last several years — recover. That should prevent you from getting taken out of stocks prematurely.
Best wishes,
Mandeep
Small Cap Edition, By Mandeep Rai, Senior Analyst Mandeep Rai has more than 15 years of investing experience, working as both a stock and credit analyst. At Weiss Ratings, he researches and evaluates financial and economic themes, and makes decisions on when to buy or sell specific shares for the Top Stocks Under $10 portfolio. |
