So writes Mitchell Clark (www.profitconfidential.com) in edited excerpts from his original article* entitled The Great Big Stock Market Disconnect.
This article is presented compliments of www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Clark goes on to say in further edited excerpts:
There just isn’t enough real economic growth in the marketplace. Some companies are doing well (and I’d say buy great companies when they’re down on the stock market) but the trouble is that the market is trading right near its high.
A lot of companies reported solid earnings in the fourth quarter, and the stock market was happy about it. The problem is that revenues either came up short, or revenue outlooks weakened for 2013. The market always focuses on earnings, but the most important financial metric that’s worth betting on isn’t earnings—it’s revenues. This is especially the case in a slow-growth environment….
This is the great big disconnect in the stock market today. Stocks are going up on better-than-expected results, but in a lot of cases, there isn’t any real economic growth at all! The only reason I can think of why many stocks are going up on mediocre news is because most are trading below their historical valuations.
Corporations have done an outstanding job of maintaining their earnings throughout the last recession and in the current slow growth environment. Large corporations are especially good at this through cost control but what we need to see is meaningful top-line growth, and we’re not getting it consistently from industry. This is the reason why I’m not bullish on the stock market and why I wouldn’t be a buyer right now….
Unless revenue growth materializes next earnings season, the stock market is dead. Because corporations are so lean now, revenue growth will translate straight to earnings, and that’s what this stock market needs to stay afloat. [As such,] stock market investors need to be very cautious going forward.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
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