Today on Berman’s Call: Earnings Season Does Not Have High Expectations

Author Larry Berman

Posted: 9 Apr 2012 reposted from etfcm

Investors are about to turn their attention back to Q1 earnings, which are the weakest in several quarters. The trend in the past few months have been towards more downgrades of 12-month forward earnings than increases. If we backed out technology, earnings growth for the quarter would be negative for the index overall on a Q/Q basis with the biggest weakness in telecom, materials, energy, and health care. This suggests the TSX will also see a rather poor quarterly earnings period given the much higher energy and materials exposure, although most of these Canadian stocks have corrected already, they have not in the US.

The one area we just cannot seem to reconcile well is the retail stocks. XRT is the ETF representing an equal weight index of US retailers. The chart show that US retail stocks are 30% above their 2007 peaks, which is hard to reconcile compared to the unemployment picture and massive debt hangover and housing stress. So with expectations on the low side, that could mean some surprises, but the fact that stocks have been relatively strong heading into the earnings season, the good news is probably already factored in. Expect volatility to pick up significantly in the coming months with uncertainty levels so high and debt concerns brewing again in Europe.



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