If you turn on the financial news networks they will be harping on the fact that while 70% of companies are beating earnings estimates just 42% are exceeding revenue estimates. Most fail to also point out that S&P 500 earnings in aggregate are at record levels. So, if earnings are at record levels it should not be shocking that the market is moving higher.
Aside from the Federal Reserve and its policies, there is probably no other more controversial force in the financial markets today than high frequency trading. Since today also happens to be the three year anniversary of the Flash Crash—the very event that thrust HFT into the public spotlight—let’s take a moment and consider this topic from what’s been learned over recent years.
Carmen Reinhart and Kenneth Rogoff are apparently eager to repair their dented reputation with the economic mainstream. After having to endure and fend off an attack of Keynesian deficit spenders...
Thoroughly relishing his “I told you so” moment, Paul Krugman titled his Friday New York Times piece “Not Enough Inflation”: “Ever since the financial crisis struck, and the Federal Reserve began ‘printing money’ in an attempt to contain the damage, there have been dire warnings about inflation — and not just from the Ron Paul/Glenn Beck types.
No central bank wants to shock the economy the way the Fed did in the late 1930s, with its too-soon response. That experience suggests that they will err in the direction of waiting too long before removing QE or tapering the existing process. For investors, that means a prolonged period of very low interest rates, which are bullish for asset classes of nearly all types.
The week's reports did not start out well with a three-day continuation of the last two months of awful reports. But there was hope and excitement created when weekly unemployment claims fell on Thursday and the jobs report on Friday showed 165,000 new jobs were created, better than the forecast for 135,000.