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Macro View

The Q3 earnings season hasn’t exactly been a great one, at least so far. A number of key bellwethers have reported lackluster results, giving further credence to the idea that markets are headed lower.

Furthermore, it isn’t like the earnings weakness has been concentrated in any one sector or region of the broad economy either. Technology, usually a bastion of growth, has been among the weakest, headlined by Intel, (IBM - Analyst Report), and Google (according to our own Sheraz Mian), while (DD - Analyst Report), (GE - Analyst Report), and (CMG - Analyst Report) round out the weakness in a variety of other market segments, underscoring just how widespread the earnings misses have been this time around.

In fact, of the roughly 20% of S&P 500 stocks that have reported so far, the average earnings growth rate (yoy) has been -2.8%, while the rate drops to just -4.2% when you exclude the financial sector.

Given this trend for U.S. corporate earnings, and the lack of help from both Europe and major emerging markets like China, where can an investor go for growth, or at the very least stability, in this current environment?

Do any of the following choices sound good to you for high growth pockets in this uncertain time?

  1. Housing/construction -- This sector has been a strong performer as of late thanks to better data and hopes for a rebound in the segment (see more on this in a recent Real Time Insight post on housing investing)
  2. Social -- Has this space bottomed out as well? (FB - Analyst Report) is surging in Wednesday trading.  
  3. Financials—This industry has seen decent earnings; is it time to bet on banking?
  4. Emerging Markets – Yes, China is showing signs of weakness but there are plenty of smaller emerging nations that are still growing strong (see more on this in Andean ETFs: A Better Way to Play Emerging Markets?)
  5. Some other segment -- Let us know in the comments below!!


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