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No news is not good news

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by Peter Switzer

No news is not good news but it’s miles better than bad news for investors hoping to see the stock market break out of this current correction.

Wall Street went nowhere and the cause was simple — no really good or bad news! The Dow was up 0.07 per cent but suggestions that the troika — the EU, ECB and the IMF — had not made enough progress with the Greeks with their austerity plan undermined a bit of confidence.

Ironically, after the closing bell, news broke that the troika was happy with the progress and this underlines the silliness of market moves right now. The big story is that the market has traded off the overselling and we’re at the levels investors are content to hang around until a very good or very bad news item sends the indexes up or down.

In fact, the possible good news of what the Fed boss Ben Bernanke might say tomorrow countered the bad news of Italy’s rating downgrade.

Bernanke tomorrow is big news and the market will wait with bated breath but could bad news actually be good news for the future?

Well, the bad news is that CNBC reports analysts have lowered their predictions for US company earnings for the third quarter to 14.3 per cent, according to the S&P Capital IQ Consensus Earnings Report.

The old guess was 16.94 per cent but this is still the eighth quarter in a row that earnings have gone up more than 10 per cent. That’s a very good sign for the US economy and the corporate sector.

By the way, nine out of 10 sectors are expected to improve quarter on quarter and energy as well as materials are expected to show the best growth, up 52 per cent and 31 per cent respectively.

If we could just see some better-than-expected European news, we could be off to the races, but on recent showings out of the continent that’s a huge 'if'.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, September 21, 2011

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