Earnings Update and Seasonal Trends in the Capital Markets

With over 90% of the S&P 500 companies reporting (90 day treadmill), we give the season a B+, and seasonally we are starting a good time of the year.

Capital Market Companies continue to struggle (although somewhat less) with sales, but due to strong cost cutting (increased productivity) most are providing reasonable bottom line (Net Income/EPS) growth.  As a side note, looking over the next few quarters most companies will have easier comparisons, as sales and EPS rates, fell off a cliff this time last year, especially consumer related companies.

Historically, please do not put too much weight on this factor because Capital Markets have made a dramatic move since a worst case Armageddon scenario was taken off the table in most investors minds earlier this year, Capital Markets tend to do well in the last two and first months of the year.

Why does this happen?

In our opinion, many investors may be looking to improve performance in their investment portfolios to gain greater returns for year-end materials (i.e. Pamphlets, brochures and flyers).  Also, as the end of the year makes it way to investor’s calendars, a happy time greets many with regards to time away and family time, offering many a more positive view towards economic trends.  The beginning of the year often marks heavy cash inflows as bonus, year-end shore ups of cash, and delayed investments, make their way into the Capital Markets.  While anything can happen, 2008 for example, all other factors being equal (which they never are) history and momentum favor an upward bias in the Capital Markets for the next 90 days or so.

This is of course our opinion and history can always be re-written at any time.

Have a Good Day!


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