Being as we’re into the 2nd day of a new week, and the 2nd brow-beating day to boot, it’s hard to remember that last week represented the 2nd week in a row of gains in the US markets. While nowhere near the eye-popping double-digit gains from the prior week, the word “positive” rings a wonderful tune to my ears. US stock markets gained from 2% - 6%, the higher value representing the NASDAQ, which is heavily weighted in technology and healthcare companies that have led the way recently. Bonds were roughly flat to slightly negative for the week. In April so far, stocks are up almost 10% and bonds are up about 2% - 3%, but that was at the end of last week. This week has been off to a rough start, as the price of oil has dropped precipitously because there is an oversupply due in great part to the reduced demand. After all, I saw a joke that “my car is getting 3 weeks per mile” in gas mileage. We’re just not driving (or flying) as much right now, and using less power in factories with many of them being down. Hence, the reduced demand on fuel.
As you know, I prefer to focus on fundamentals rather than headlines. As expected, corporate earnings are significantly lower than last year at this time, but what is concerning is that after the first week of earnings reports, they are even below expectations. In reality, the ultimate problem we have encountered recently is the severe inability to accurately define what those earning SHOULD be. We have just entered earnings season, so all eyes will not just be on what prior quarter’s (lousy) earnings were, but what corporations project as anticipated earnings in subsequent quarters. Even then, is it possible that corporations will project lower earnings only to exceed them later? These are very tricky times for investors.