So far this quarter we have seen strong quarterly earnings, but with weak underlying revenue. Why is this concerning? Companies are keeping staffing tight and being run very efficiently rather than earnings coming from revenue growth. If companies have confidence in the direction of our economy we could see more job creation and better potential for future earnings as a result of future revenue growth.
In addition to weak jobs data, consumer sentiment dropped from 77.5 to 73.2 in October; a high percentage of those surveyed sighted a negative perception of the government. Also, Manufacturing PMI fell to 51.1 (still expansionary in nature). While this data only supports a moderate economic environment it does increase the likelihood of a delay in Federal Reserve tapering.
Internationally, we’ve seen UK GDP reporting in at 3.2% annualized for the 3rd quarter, China home prices rose 9.1% for September (YoY), and Spain declared the end of its Recession, having lasted 2 years. Strong international data and a delay in tapering and government battles should allow us to see improving economic data in the short run.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.
* Financial Action, Inc. is a Registered Investment Advisor.