Federal Reserve Kicks Up Communication Dust [View article]
Hi... our economy could be growing more quickly if loan demand was greater and banks weren't as tight as they are with their lending standards. Money isn't turning over in the economy because of this dynamic. In turn, companies are reluctant to expand their capacity and workforce, because uncertainty about the demand outlook is still quite high. That is owed in large part to the actions of central banks around the world. Everyone is aware of the course they have chosen, but their ability to handle an unwinding process is what has corporations and a lot of individuals playing things very conservatively still. The risk of policy error looms large while the growth limitations of debt deleveraging persist. These are important factors keeping growth from reaching its potential.
Earnings Growth Will Disappoint In 2013 [View article]
Thank you for the feedback and the question.
We think the top line is the most susceptible to disappointment given the weak growth rates in a number of the world's largest economies. Profit margins will be difficult to expand with weak revenue growth, although lower commodity prices, low wage pressures, and the ability to cut staff could provide some profit margin support.
Over the past 23 years, S&P 500 operating earnings growth has averaged 8.0%. It is not unusual to see optimistic growth rates early in the year come down as the year progresses. The outlook for double-digit earnings growth in 2013, however, seems overly optimistic when pitted against real GDP forecasts from the OECD that call for a -0.1% decline in the euro area, a subpar 2.0% increase in the U.S., and a 0.7% gain in Japan. China's GDP is expected to accelerate from 7.5% in 2012 to 8.5% in 2013. Still, that isn't likely to compensate for the weakness elsewhere to allow for double-digit earnings growth.
Federal Reserve Kicks Up Communication Dust [View article]
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Earnings Growth Will Disappoint In 2013 [View article]
We think the top line is the most susceptible to disappointment given the weak growth rates in a number of the world's largest economies. Profit margins will be difficult to expand with weak revenue growth, although lower commodity prices, low wage pressures, and the ability to cut staff could provide some profit margin support.
Over the past 23 years, S&P 500 operating earnings growth has averaged 8.0%. It is not unusual to see optimistic growth rates early in the year come down as the year progresses. The outlook for double-digit earnings growth in 2013, however, seems overly optimistic when pitted against real GDP forecasts from the OECD that call for a -0.1% decline in the euro area, a subpar 2.0% increase in the U.S., and a 0.7% gain in Japan. China's GDP is expected to accelerate from 7.5% in 2012 to 8.5% in 2013. Still, that isn't likely to compensate for the weakness elsewhere to allow for double-digit earnings growth.