As we plow through earnings season, results are beating expectations by a country mile. Not only are companies reporting huge numbers, but estimates for the third and fourth quarter are rapidly rising.

So far, earnings are up 86% year over year, with revenue up a record 21%. As has been too common lately, analysts have vastly underestimated the nominal growth of the economic recovery.

As of last week, earnings are coming in on average 18% above expectations. This is well above the typical 3-5% that we expect to see. Even revenues are coming in much better than expected at 4.6% above expectations.


With earnings growth exploding, and analysts raising earnings expectations for the third and fourth quarter, it may be premature to call the second quarter the peak as has been the narrative for the past several months amongst the so called experts.

When analysts are so consistently wrong on their predictions, it seems foolish to rely on their predictions, but they are all we have to go on. Estimates for the third quarter have risen in the past month to where analysts now expect year over year earnings growth of 28.3%, up from 24.7% a month ago.

Even Q4 estimates have been creeping higher, from 17.3% growth up to 20.3% annual earnings growth.

So, although some numbers might peak during the second quarter of this year, we aren't putting much weight on the "peak everything" theory that we were supposed to experience during the second quarter. There will come a time when we will need to pare back our positions and hunker down. But, there is no reason to do that before the turn. For now, the indexes are on a buy signal and the path of least resistance is higher.

As to when we should expect the next economic recession, the stock market almost always front runs a recession by declining several months in advance of weak economic data. You can see this in action by looking at the last few recessions on the chart below. With the major US indexes printing new all-time highs on a weekly basis, it is too early to call an economic peak just yet.

The Wanderer Life


While July isn't typically a great time to visit Arizona, it's not a bad place at all so long as you head up a bit in elevation. My mom lives in the desert, but for this visit we decided a rental home in Sedona would make a better place for the family to gather. At 4400' in elevation the temps are considerably more bearable than they are in Tucson.

Being back on Pacific time takes some adjusting, but for early birds like myself, trading on this clock is great. The market is closed at 1:00, meaning in general you can wrap things up by noon and have the rest of the day wide open for things like hiking. We clambered up Cathedral Rock for this view.

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