First, a big thanks to Kevin Cook for taking the helm of this newsletter during my vacation. He had the difficult task of explaining how stocks rose last week while the fundamentals were deteriorating. The past two negative sessions provided the proper response to this eroding economic landscape.
The best thing about a vacation is that it allows you to come back and view the market with fresh eyes once again. Unfortunately the picture is no prettier than when I left you. In fact, it’s worse.
• Spanish 10 year bond now making new highs 7.5%. (BIG red flag)
• Italian 10 year bond creeping up to 6.3%… its highest levels since January. (Yellow flag bordering on orange.)
• Drought in US = Higher food prices on the way = Less spending on discretionary items.
• Deceptive earnings season. Sure there are a lot of beats. But it is happening on weak revenue with tons of accounting tricks to make the profit look like a beat. That won’t hold up over time.
Don’t put your head in the sand. Or run to cash. There are more effective ways to fight this market environment than that. Keep tuned with us here at Zacks and we will show you the way.
Best,
Steve Reitmeister (aka Reity… pronounced “Righty”)
Executive VP, Zacks Investment Research
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