james @gk: a v-shaped recovery in profits
---voici un peu d'herbe pour nos bulls. après avoir renié, il y a 12 mois, toute possibilité de récession aux US, les voici en train de fanfaronner une v-shaped recovery. mais ne rions pas trop fort, ils finiront bien par avoir raison un jour… http://gavekal.com/index.cfm ---
In many ways, the current recovery seems to be following the dull pattern of previous economic rebounds. First, we were told that the fiscal and monetary stimulus would, this time around, not gain any traction. Then, as ‘green shoots’ began sprouting into a jungle, we were told that the economic recovery is simply an “inventory-led” rebound. Logically, this means that the next step from here on out should be declarations that the recovery is a “profitless recovery”. Following that, and as profits emerge, we will likely be told that the recovery is “jobless”. In turn, the recovery will be “unsustainable”… until, of course, books are written (maybe by us?) about how we are living a “new paradigm”...
Based on previous patterns, we should soon be entering the phase of the cycle whereby investors ponder how “profitless” the recovery really is? Of course, for investors, the question of profits is always critical. After all, corporate profits are one of the two main determinants of stock market performance (the other being the cost of money). And in a period when most investors are still overweight cash, corporate profits are all the more important since they can give investors the courage to deploy capital in risk assets.
Interestingly, looking through our series of indicators, we find that there are a number of reasons to believe that corporate profits could surprise on the upside.
