By Bob Landaas
Recently completed earnings announcements for the third quarter came in above estimated forecasts overall. With relentless cost-cutting and now top-line revenue growth, we’re on our way back to record levels of profits from the companies in the benchmark S&P 500. That should be good for stock prices.
Posing potential concerns, sovereign debt problems in Europe have resurfaced, and China’s inflation rate is worrying investors that China will have to increase interest rates to reduce growth, possibly impacting the global economy.
In the bond market, recent profit-taking should be short-lived as the Federal Reserve embarks on a new round of quantitative easing, aimed at stimulating the weak U.S. economy. Also, bond investors should find comfort in the most recent inflation report, which shows the lowest core inflation rate on record, based on year-to-year data going back to 1957.
We remain guardedly optimistic about the stock and bond markets. Volatility will remain high until investors are convinced the recovery is firmly underway.
Bob Landaas is president of Landaas & Company.
initially posted November 23, 2010