Spain and Europe are back in the news this morning as stocks get sold aggressively, but this looks like more of a micro picture to me. That is, if you read this morning’s earnings reports you’ll continue to see more of the same – earnings aren’t great and guidance for the future is abysmal. But this isn’t just a case of the micro as much as it’s a case of the macro hurting the micro. You see, the trend we’re seeing in these earnings reports is weakness in broader economic growth particularly in multinationals where weaker than expected growth in Europe and China are hurting profits.
Look at the trend from this morning’s big reports:
- Via UPS:
“Our results were achieved in an environment of slowing global trade and changing market dynamics,”
- Via United Tech:
“We expect earnings per share of $5.25 to $5.35 for 2012. Faced with a challenging economic environment, we are increasing our investment in restructuring this year
- Via MMM:
“In the face of the current slow-growth economy, our businesses continued to grow organically and generated record profitability. All six of our businesses posted 21 percent-plus operating margins in the quarter, so we continue to execute well in 2012.”
It’s ugly out there and there’s nothing Ben Bernanke can do to keep corporate profits from sliding at this point. Keep your helmets on and your hands in the vehicle at all times.
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.