Markets are choppy today as investors navigate an environment which is showing some signs of fragility.
- Earnings overall have been very good, however, the expectation ratio has plummeted in recent weeks. We are beginning to wonder if the analysts aren’t too optimistic about future corporate earnings growth.
- Ford reported a quarter that is likely a fairly good barometer of the global economy. Rising input costs, weak European sales, but generally stronger growth in other markets.
- Spanish and Portuguese borrowing rates are near their all-time highs again. Bond vigilantes are pushing the ECB to its limits here. Is there enough political unity in Europe to keep the Euro together? The Euro is trading down 1%.
- Chinese markets were up marginally overnight, however, remain just near their 3 month lows. As a fairly reliable leading indicator this remains a primary concern.
- Technology stocks are getting hammered on the back of Amazon’s earnings. Margin compression is becoming a very real concern in more and more sectors.
- GDP was solid, however, we’ve entered a market environment where expectations are extraordinarily high now.
- The VIX is trading higher by 19%. Is investor complacency coming home to roost?
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.