Home About Archives RSS Feed

@theMarket: A Cause to Pause

By Bill SchmickiBerkshires Columnist

Markets usually need something to move them. Good news or bad, the markets want an excuse to go up or down. Now that the government, the debt ceiling, the budget and the Fed are temporarily out of the picture, investors are finally focusing on something meaningful — earnings.

Actually, that is a good thing. It may indicate that the financial sector is at last returning to its historical roots after years of government bail-outs, monetary control and political drama. There was a time, some of you may remember, when earnings could make or break the markets. I don't think we are there yet, but company earnings this week have given the market cause to pause.

The sampling of company data thus far in this earnings season has been lackluster at best. Companies in the financial, health care, retail and several other sectors have disappointed. The Christmas season, for example, was evidently a disappointment for many traditional, non-internet retailers. Consumer shopping behavior is clearly changing as more and more people shop the web and shun the malls.

To tell you the truth, I am one of those who have abandoned the store for the ease, convenience and competitive prices offered through my computer. Just about all of my holiday shopping was done that way, including the gift certificate I purchased for my wife at a local clothing store.

In the financial sector, banks and brokers are struggling with the new curbs on proprietary trading as well as regulations that require them to amass more capital to offset the risks they are taking in their businesses. Bond trading, which had been a big profit center for financial institutions, also did poorly thanks to rising interest rates.

Granted, it is still early days in the earnings season. I am sure that there will be some absolute gems in upside earnings surprises. The trick is to identify those companies that shine and avoid those that won't. Wow! Could we really be at that point in the recovery where the fundamentals of individual companies have once again become important to their stock price?

As readers are aware, I believe the economy is accelerating and employment rising. All is well in the world right now.  Markets over the last few years have climbed a wall of worry but it appears that those worries have faded. We have yet to replace them with new ones or maybe the new worry is that there isn’t anything to worry about it?

So what are the negatives?

We are in the second year of a four-year presidential cycle. If one looks back through the post-World War II period, we find that these "second years" have been the absolute worst performance years in the stock market. To make matters worse, stock market returns have been even lower than normal when the president has been a Democrat.

Valuation also bears watching. Markets are not yet expensive, but could become so if enough companies fail to live up to expectations. What is now simply a pause in the market's advance could become a rout, if too many companies disappoint. But what continues to bother me the most is the sentiment indicators. There are just too many bulls out there for my taste. As a contrarian, I like the markets most when no one else does. However, none of the potential negatives tempt me to bail on stocks. Stay the course.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Letter: Virginia Riehl Would Bring a Thoughtful Voice to City Council
First Responders Pull Truck From Pontoosuc Lake
Cheshire Select Board Centralizes Public Records Requests Under Town Administrator's Office
North Adams Begins Downtown Christmas Tree Installation
Cheshire Youth Center Lease Negotiations Continue Over Capital Improvement Costs
Regional Trail Coordinator Barnes Retires After Four Decades With DCR
Veteran Spotlight: Marine Cpl. Andrew Coville
Elder Services Celebrates More Than 50 Years While Navigating Federal Challenges
Lee Bank Foundation Awards Grant to Berkshire Art Center
Eagles Band Marks 90 Years With Free Concert, Original Composition
 
 


Categories:
@theMarket (603)
Independent Investor (452)
Retired Investor (315)
Archives:
October 2026 (9)
September 2026 (8)
August 2026 (8)
July 2026 (10)
June 2026 (8)
May 2026 (9)
April 2026 (9)
March 2026 (7)
February 2026 (8)
January 2026 (8)
December 2025 (8)
November 2025 (8)
Tags:
Europe Housing Metals Debt Ceiling Mortgages Federal Reserve Currency Banks Euro Markets Stocks Bailout Commodities Recession Retirement Stock Market Greece Fiscal Cliff Taxes Japan Election Congress Wall Street Debt Rally Deficit Stimulus Selloff Oil Interest Rates Jobs Crisis Energy Economy Pullback
Popular Entries:
The Retired Investor: The Hawks Return
The Retired Investor: Has Labor Found Its Mojo?
The Retired Investor: Climate Change Is Costing Billions
The Retired Investor: Time to Hire an Investment Adviser?
The Retired Investor: Crypto Crashes (Again)
The Retired Investor: My Dog's Medical Bills Are Higher Than Mine
The Retired Investor: Food, Famine, and Global Unrest
The Retired Investor: Holiday Spending Expected to Stay Strong
The Retired Investor: U.S. Shale Producers Can't Rescue Us
The Retired Investor: Investors Should Take a Deep Breath
Recent Entries:
@theMarket: AI Implodes; Markets Wait & See What Midterms Bring
The Retired Investor: AI and the financial markets
@theMarket: Markets Still Holding It Together Before Midterms
@theMarket: Inflation Jumps, Stocks Dump
The Retired Investor: Corporate profits better be good
@theMarket: Stocks Eke Out Gain for the Week
The Retired Investor: Could Higher Bond Yields Simply Reflect a Stronger Economy?
@theMarket: Equities Struggle as Oil And Bond Yields Continue to Pressure Stock Prices
The Retired Investor: The ailing housing market is getting sicker
@theMarket: Bonds Are Breaking Bad But Equities Shrug It Off