Look to earnings for read on stocks

The recent volatility in the global markets has a lot to do with the world’s second biggest economy: China.

Recent Chinese Purchasing Manager surveys have come in under 50%, suggesting slowing conditions in the industrial part of the economy.

Most economic numbers out of China are not considered to be reliable, but this one is in my opinion.

Jittery Markets

Yet the broad sell-off in global markets has also been overdone in my view.

I do not think that US utility companies, domestic regional banks and telephone companies are going to be highly affected by developments out of China.

It appears that in recent weeks the selling has been indiscriminate and panicky.

Tame Treasuries

Lastly, if investors were convinced of an imminent economic decline in the US, you would likely see both a selloff in equities and a meaningful shift to long-term Treasuries.

A relatively slight decline in the 10-year Treasury rate from 2.20% to 2.17% does not suggest a confirmation of equity market sentiments.

Buying Opportunities

I believe opportunities are being created but emotions may be the name of the game for a while.

Obviously there will be more economic numbers over time that may provide insight.

I look forward to the next earnings season in October and management commentaries that tell of actual experiences in the business world.

I am pretty sure we will get confirmation of some of today’s worries from such companies.

Yet here is also a chance that such worries may be overly discounted into the market.   Photo Credit: Ken Teegardin via Flickr Creative Commons  //

Subscribe to our once-weekly email newsletter and get the best posts delivered to you in one convenient place, to browse at your leisure://

The post Look to earnings for read on stocks appeared first on Smarter InvestingCovestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures.