This week was the busiest week of earnings on the calendar. Half of all S&P 500 companies have now reported for Q2. So far so good! 81% of companies have beaten earnings per share (EPS) expectations – by an average of about 6.4%. By way of comparison – prior to COVID – the average EPS beat was in the realm of ~3%. What’s more, about 64% of all companies have also beaten top line expectations. The question is will this continue in the second half?
The One Thing Driving the Market
It’s risk on. That’s the market’s sentiment. Question is whether that risk is worth it? There are only a handful of stocks carrying the market higher – a sure sign of both fragility and bearishness. Are there are only “10” stocks that can grow? We have not seen a market this narrow since the dot.com bust. Now should names like Amazon, Google, Apple, Microsoft, Meta and Tesla pull back from nose-bleed valuations – the whole house comes down with it.
Equities Often Slow to Connect the Dots
Last week I warned the market was poised for a sharp pullback. This week we got it. In short, both fundamentally and technically the market felt vulnerable. Market multiples pushed 19x forward on little substance. And from there, it did not take much for the bulls to lose their nerve…
Remain Wary of Permabears
Jeremy Grantham is a well known permabear. This week – he called for a possible 50% correction. Sure… it’s probable we see something in the realm of 20%… but 50%? I decided to look at Grantham’s track record against the S&P 500 over 25 years. Guess what – he has woefully underperformed the market. Hardly surprising. Beware of doomsday ‘crash callers’ like Grantham… and he is not alone. They are dangerous.
For a full list of posts from 2017…