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Healthy fundamental outlook

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Based on recent earnings forecasts and global economic trends, market fundamentals support continued stock investments, Bob Landaas says in a Money Talk Video. Here is a transcript.

Well, as of the end of May, the stock market has had a really good run this year. We’re up 15 percent on average for the broader indices, and so it’s common for investors to take a look at the next six months wondering what they’re going to see.

Goldman Sachs estimates are calling for a 1700 S&P 500. That would be an additional 5 percent increase from current values.

And there are several crosscurrents that are important to follow. One, of course, is the slowdown in Europe. Europe has had six quarters in a row of contraction. We’ve seen slower growth in China, as they try to transition to more of a consumer-based economy.

And on the other hand, we’ve seen Japan stimulate their economy. The yen has fallen. It has done a wonderful job in stimulating their exports, so Shinzo Abe in Japan should be congratulated for trying to turn the Japanese economy around after 20 years of stagnant growth.

So when you look at current stock prices, we’re trading for roughly 15 times earnings.

Bloomberg forecasts call for a 10-percent increase in profits next year. A little bit early to call, but they’re also forecasting 11-percent increase in profits for the year after next. Now, those are fairly close to historic numbers.

Earnings, on average, go up a little over 10 percent a year. When you add it all together, I think there are strong fundamentals for stocks.

Bob Landaas is president of Landaas & Company.

Money Talk Video by Peter May
(initially posted June 7, 2013)

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