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Short Term Sell Off- Long Term Growth?

May 08, 2011 9:56 AM ET
John Mylant profile picture
John Mylant's Blog
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News is giving us a possible investing strategy--

This is something I have been waiting for and I am surprised it has taken so long. Of the earnings reports we have had so far, just 60% of US companies have beaten earnings estimates this earnings season. In the beginning of the season, the "beat rate" was much higher, but it has drifted lower and lower to its current level as earnings season has progressed. There have been 1500+ companies that have reported so far, and with so few companies left to report, it's going to be hard to bring the rate higher. If earnings season were to end today, it would have the lowest "beat rate" of any quarter during the current bull market.

There is a plethora of bearish news out there. Just in commodities, gold lost half of its April gains; silver did worse, surrendering all of its April gains and some into March; and oil tumbled quickly this week losing most of the gains it acquired the last 6 weeks. A few things have happened in Europe also. The restructuring of the Greek bond market is looming every so real and this does not sit well with the markets. Portugal had a less than stellar bond sale. As the USD gains strength, this is not good for the EUR and commodity backed currencies. Tightening is coming and pullbacks are due, so be aware as a trader.

On a bright spot for long term growth, C&I Loans have risen at an 8.6% annualized rate over the past three months. Why is this important? More lending reflects increased confidence on the part of banks and businesses to take risks, and it's risk-taking that fuels growth. And unemployment figures are starting to work for us! Payrolls increased by 244,000 and the unemployment rate edged up to 9.0%. February and March employment gains were revised upwards so the trend for now is our friend. It does indicate some continuing improvement in hiring and by implication a continuing if maybe weak expansion of the economy.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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