CHART OF THE DAY: Stocks Often Rise When Earnings Are FallingMamta Badkar | Aug. 8, 2012, 10:05 AM | 524 | 1inShare2 EmailMore Investors have recently been pessimistic on the U.S. stock market and pointed to the fact that slowing economic growth is impacting corporate earnings.But BMOs Brian Belski notes that “S&P 500 earnings are not U.S. GDP”.And even when S&P 500 earnings fall, stocks often do well.He draws our attention to this cool chart which looks at stock market performance from 1950 – 2011 to illustrate his point.
via This Chart Shows That The S&P 500 Can Do Well Even When Earnings Suck – Business Insider.
I’m very happy to see this chart from Business Insider. I’ve been stating for some time that the market doesn’t really like a strong economy. Too strong of an economy means inflation is heating up, there is competition for paper assets, and monetary policy is going to get tighter. I think we are in a true sweet spot right now and I’m more bullish on the market than I have been since the 9o’s. As we pointed out in Seeking Alpha many many stocks are undervalued by the DCF model.