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Welcome to the Second Half!

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Tuesday, July 1, 2014

This is Mark Vickery, covering for Sheraz Mian while he is away this week.

Welcome to the second half of 2014 — the one that will supply all the economic growth for the full fiscal year! The weather’s pleasant, there’s plenty of pent-up demand in many industries, housing is steadily improving — what’s not to be excited about?

There is the little matter of first shedding whatever disappointments come from Q2 earnings, but this won’t begin to manifest itself until a week from today when Alcoa (AA - Free Report) reports after the bell. At that point, the downwardly revised earnings estimates for a plurality of S&P 500 companies will be modestly hurdled, just as has been the case throughout this milquetoast economic “recovery.”

Of course, I really don’t know this to be true. There’s a reason companies report and not just allow analyses to decide results ahead of time; speculation takes a back seat at that point. It could be that Q2 was much stronger overall than we’re currently expecting. But the truth is that companies have once again been lowering expectations, meaning the true believers of a serious upturn in economic growth are still very scarce.

Manufacturing and Construction numbers will be coming out later today, providing an oasis in the desert of economic data-less existence. Every clue we get here is key; the onslaught of earnings results is still a couple weeks away. So what we see in terms of shedding weather-related Q1 numbers should be quite informative, especially considering how important these industries are to the economy as a whole.

We’re not holding our breath for blockbuster results for any of this, however. But we are keeping our eyes open for signs of serious traction, which will not only justify the markets’ strength but also clear some pathways for increasing gains going forward.

Mark Vickery
Senior Editor

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