In turn, the boundaries of the recent range are being reinforced. This flat period, though frustrating to action-seekers, could have beneficial effects. After five super-charged years, consolidation of gains and reduced volatility should calm nerves, help make expectations more realistic and allow earnings to catch up at least somewhat with stock prices. While it's difficult to conjure up potential catalysts, we think the eventual breakout will be to the upside.
Psychology is still basically favorable and fundamentals are solid.
Psychology is still basically favorable and fundamentals are solid. Corporate profit growth is slowly moderating. But with the benefit of productivity improvement, earnings should continue healthy. Earnings quality is showing some signs of slipping. Increased pension profits, lower taxes and other non-operating items seem to be contributing more heavily to bottom lines.