Author Archives: Donald Capone

As the summer comes to a close, market participant’s will begin to come back from their vacations and once again focus on the direction of the market.  Once again this course will be laid with the expectations of both the economy and individual stocks, higher expectations generally mean a growing stock market.  However, these higher expectations come with a higher cost, the risk of not meeting those expectations.  Over the last few days we have seen both economic numbers and company earnings information, for the most part come in better than market participants were expecting.  Part of this comes from companies being overly cautious when making predictions of the future, as well as economists being overly cautious as they make their predictions for the future.  The problem with the continued beating of expectations is if the market fails to continue to beat expectations or the rate at which they are beating them slows that market has the potential to come falling back to reality.  This is similar to someone coming off a “sugar high,” once you come back to normal you generally need more sugar to amp your body up again.  Our hope is analysts will slowly raise their expectations so the market doesn’t get addicted to the “sugar” too quickly. DC

One thing most people can agree on is that we can expect more of what we have seen over the last few days from the markets moving forward.  While it seems that each economist has their own view of what could happen for the remainder of the year, it is also evident that investor’s are trying to figure out that same notion.  While it is clear the market has had a huge rally from extremely oversold levels, we have now reached to point of “what next?”  Until investor’s can obtain more clarity on what that is, the markets will continue to have a see-saw action.  The market will continue to be very news driven, because right now that is all investor’s have to gauge the expectations of the economy moving forward.  While it makes for a bumpy ride in the short-term, when we are able to look back in our rear-view mirror over the coming years the ride will have looked a lot smoother. DC

After last quarters earnings releases, market participants were not sure what to expect moving forward.  Most analysts began cutting estimates for the following quarter, as we have seen with this quarters earnings releases, those estimates may have been cut too low.  As of 07/31/2009 we are almost 70% of the way through earnings season and so far 80% of the companies that have released earnings have either beat or met expectations.  In this case that may show Analyst’s lowered their expectations too much after the 1st Quarters releases.  The question moving forward is what happens next quarter, just as Analyst’s can get too cold (causing the market to move higher because so many companies beat expectations), they can also get too hot (causing the market to move lower because not enough companies beat expectations).  Moving forward we will continue to monitor analyst expectations to obtain a gauge of what will happen next quarter. DC

I am back from the AFG Conference and after almost a week of contemplation I think I have my thoughts in order to give an accurate account of what I learned at the conference.  As I am sure most of you are hearing, there are going to be plenty of “Ups and Downs” in the market moving forward.  This will be especially true as we move through the slow pace of the “Summer Doldrums.”  On a similar theme to John’s post about his CFA Conference experience I will briefly discuss “The Good, The Bad, and The Ugly.” Continue reading →

One of the most well known sayings on Wall-Street is “Sell in May and Go Away,” the main focus of this saying expresses the view that traders and portfolio managers tend to take the summer off from investing.  To do this managers close out some of their underlying positions or most likely just make less trades over the course of the summer.  While I have experienced this trend many times over the course of my career, I am not sure it will happen this summer.   I am sure that things will be slower during the summer around some of the major holidays, I don’t feel that people will be completely absent from the markets like previous years.  If nothing else it maybe the individual trader who carries the market through the summer “doldrums.”  I believe that there is too much riding on the next few months for people to just walk away and forget about the markets until September.  DC