Tags: market | earnings | stocks | fundamentals

USA Today: Q3 Earnings Will Reveal Stock Market's True Health

By    |   Friday, 10 October 2014 11:54 AM

The answer to whether the stock market swoon is being caused by unfounded fear or for good fundamental reasons might be answered by third-quarter earnings reports.

The recent weakness in stocks has produced the most violent price swings since 2011, with Wall Street's popular CBOE Volatility Index (VIX) surging more than 25 percent on Thursday alone.

"And that raises the question as to whether the selloff is a short-term phenomenon caused by jittery investors selling first and asking questions later, or whether it is telegraphing tougher times ahead for the global economy — and U.S. growth," USA Today stated.

The newspaper concluded investors will learn more as third-quarter earnings releases start to flow in the coming weeks, and corporate CEOs share their outlooks in their earnings calls and announcements.

"With the Federal Reserve ending Treasury and mortgage bond purchases, expect the market to focus on corporate earnings, especially top-line revenue growth and guidance, now more than ever," Prudential Financial market strategist Quincy Krosby told USA Today.

"The market is poised to enter a period of discovery: how much of the ride up was due to the massive bond-buying program versus fundamentals."

Alan Skrainka, chief investment officer at Cornerstone Wealth Management, told USA Today investors should be on the lookout for future opportunities among the stock market carnage.

"The selloff is being fueled by fears that the global economy is slowing down. Europe is barely growing, and China has slowed down considerably," he said. "The market was overdue for a correction. Not every correction develops into a bear market. Every economic slowdown is not a recession. Look for opportunities and maintain a long-term perspective."

MarketWatch columnist Jeff Reeves said he is staying cautiously optimistic for now.

"While I remain convinced that any dips in the market will be short-lived, and that the long-term trend is for higher prices, it makes sense to consider getting defensive in the short term," he wrote.

Reeves said the fact that small caps are underperforming at the moment while defensive plays like utilities, consumer staples and healthcare are displaying strength shows investors are in a "risk-off" mindset.

He recommended that investors raise their exposure to Europe, where stocks appear downtrodden, that investors tread lightly in bonds, which are already expensive, and that they "average in" to their stock purchases to benefit from lower prices.

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The answer to whether the stock market swoon is being caused by unfounded fear or for good fundamental reasons might be answered by third-quarter earnings reports.
market, earnings, stocks, fundamentals
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2014-54-10
Friday, 10 October 2014 11:54 AM
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