Sensible Investing

It is becoming increasingly clear that the economic situation continues to deteriorate.  A recent worse than expected job report showed that the unemployment rate shot up to 7.2%.  We had negative earnings pre-announcements from industry bellwethers, such as Intel and Time Warner.  Today, Alcoa reported fourth quarter earnings that were worse than analysts’ estimates.

This time of year marks the beginning of the earnings season, and all indications are that it is going to be quite dismal.  Investors, however, are anticipating this, and the question is whether the earnings will be even worse than already low expectations.   The current estimates are for 1% decline from a year go.  As recently as last October, analysts were expecting nearly 50% rise!

It is quite obvious that the economic situation is going to get worse before it gets better.  The market is likely to bounce around until a clearer picture emerges.  A retest of Novembers lows is possible.