Strong Corporate Earnings and the Bear Market: How it will play out

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Strong Corporate Earnings and the Bear Market: How it will play out

By: profit confidential

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Remember this summer when the Dow Jones Industrial Average had a couple of 400-point loss days and we heard so many stock advisors and analysts tell us we were headed straight into a second recession…that corporate earnings would plummet? Stocks fell 20% from their May 2, 2011, high and all of a sudden headlines started to appear saying that we were in a bear market. Well, these advisors and analysts jumped the gun, as most fail to understand how a bear market actually works.
Let’s take a quick look at some earnings reports from big American companies over the past day or two: American Express Co. (NYSE/AXP) made $1.24 billion in the third quarter, up 13% from the same period of last year. AT&T Inc. (NYSE/T) reported a big profit of $3.62 billion in its last three months. Intel Corporation (NYSE/INTC) posted a 17% profit gain to $3.47 billion in the third quarter.
Morgan Stanley (NYSE/MS) beat analyst expectations and made $2.2 billion in the last quarter. Even beleaguered Bank of America (NYSE/BAC) surprised and reported a strong profit of $5.9 billion in the third quarter.
All told, these few companies mentioned above added $16.43 billion to their coffers in the third quarter. Most of corporate America is doing fine right now (see Three Big Money Profit Stocks). And if they start to see earning growth slow, they’ll simply cut payroll again.
Where am I going with all this?
For the benefit of our thousands of new readers, here’s where we stand today.
A 20-plus-year bull market in stocks ended in October of 2007. A bear market started in October of 2007 that served to send stocks to a 12-year low on March 9, 2009…what I refer to as Phase I of the bear market. On March 9, 2009, a bear market rally was born. That rally, which is a classical Phase II of a bear market, has been going on now for 31 months. Bear market rallies last three to four years.
Strong earnings growth is coming from corporate America. Pessimism amongst stock advisors and investors is also very high. Bear market rallies continue higher under such a scenario. A bear market rally has only one purpose: to give investors the false hope that all is well and that stock are a safe bet. We’re not there with this mentality yet, but that’s where we are headed. And when we reach that point, that’s when the bear market will start to head south (Phase III) towards its March 9, 2009 low. Sure, corporate earnings are strong. But the long-term structural problems of the U.S. (i.e. underemployment of 16.5%; interest rates that have bottomed and can only rise; a fiat currency in too much supply; inflation) will eventually overcome corporate America and the stock market.

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Profit Confidential we analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe Profit Confidential will mean for you tomorrow!

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<h1>Strong Corporate Earnings and the Bear Market: How it will play out</h1><p> Remember this summer when the Dow Jones Industrial Average had a couple of 400-point loss days and we heard so many stock advisors and analysts tell us we were headed straight into a second recession…that corporate earnings would plummet? Stocks fell 20% from their May 2, 2011, high and all of a sudden headlines started to appear saying that we were in a bear market. Well, these advisors and analysts jumped the gun, as most fail to understand how a bear market actually works. <br /> Let’s take a quick look at some earnings reports from big American companies over the past day or two: American Express Co. (NYSE/AXP) made $1.24 billion in the third quarter, up 13% from the same period of last year. AT&T Inc. (NYSE/T) reported a big profit of $3.62 billion in its last three months. Intel Corporation (NYSE/INTC) posted a 17% profit gain to $3.47 billion in the third quarter.<br /> Morgan Stanley (NYSE/MS) beat analyst expectations and made $2.2 billion in the last quarter. Even beleaguered Bank of America (NYSE/BAC) surprised and reported a strong profit of $5.9 billion in the third quarter.<br /> All told, these few companies mentioned above added $16.43 billion to their coffers in the third quarter. Most of corporate America is doing fine right now (see Three Big Money Profit Stocks). And if they start to see earning growth slow, they’ll simply cut payroll again.<br /> Where am I going with all this?<br /> For the benefit of our thousands of new readers, here’s where we stand today.<br /> A 20-plus-year bull market in stocks ended in October of 2007. A bear market started in October of 2007 that served to send stocks to a 12-year low on March 9, 2009…what I refer to as Phase I of the bear market. On March 9, 2009, a bear market rally was born. That rally, which is a classical Phase II of a bear market, has been going on now for 31 months. Bear market rallies last three to four years.<br /> Strong earnings growth is coming from corporate America. Pessimism amongst stock advisors and investors is also very high. Bear market rallies continue higher under such a scenario. A bear market rally has only one purpose: to give investors the false hope that all is well and that stock are a safe bet. We’re not there with this mentality yet, but that’s where we are headed. And when we reach that point, that’s when the bear market will start to head south (Phase III) towards its March 9, 2009 low. Sure, corporate earnings are strong. But the long-term structural problems of the U.S. (i.e. underemployment of 16.5%; interest rates that have bottomed and can only rise; a fiat currency in too much supply; inflation) will eventually overcome corporate America and the stock market.<p><h2>Author Info</h2>Profit Confidential we analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe <a href=”http://www.profitconfidential.com”> Profit Confidential </a> will mean for you tomorrow! More <a href="http://www.articlesroom.com">free articles</a> from <a href="http://www.articlesroom.com">http://www.articlesroom.com</a>

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Strong Corporate Earnings and the Bear Market: How it will play out

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