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What’s Next

February 7, 2011 – 6:06 pm

This morning as Egypt fades from the headlines the talk on Wall Street was all about mergers and buyouts. It wasn’t that there were deals that were big rather it was the fact that there were so many.

Corporations have been flush with cash for some time and they have been adding to that cash hoard quarter after quarter so this year should be full of not only mergers and buyouts but stock buyback announcements and increased dividend payouts.

Earnings this year should start to slow and stock prices could well pause because of it but do not underestimate the power of cash and not only are corporations flush with it, individuals who are earning next to nothing on money market returns could well feed some of that money into the stock market. In fact we are seeing some of that already. It is hard to determine the strength of the rise in stock prices this year but they should continue to go up.

The danger is an overheated market, or inflation or maybe something overseas that we can’t foresee but there is always danger. Go with the probabilities and that is that the economy is likely to continue to improve and jobs should start to show up. In that case corporate earnings are not going to fall, just not grow as robustly as in the past couple of years.

Good Trading
Steve Peasley

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