As March slowly comes to an end, investors should start to think about how first quarter earnings will shape up in North America. Lately, everyone has been discussing the tragedy in Japan and how that would effect the global economy, or the unrest in the Middle East and how that will play out for the broader global markets. Very few have looked ahead to the upcoming earnings season, which should get started in the next few weeks. What can we expect from these reports, and will these results trump the unrest and catastrophes that have taken over the headlines in the past month?
In my opinion, I think we will see another good reporting season. Last quarter, many companies increased their outlook for the year and reported higher earnings, and I see no reason why this will not continue. It will be interesting to see how the U.S. banking sector will fare this earnings season when the major ones report around the third week of April. Some banks like J.P. Morgan Chase have already stated they are increasing their dividends and buying back a large number of their outstanding shares, citing they have a lot of capital on their balance sheets and are trying to figure out how to spend it. Thus, investors will see if J.P. Morgan Chase is the exception or the rule when it comes to the U.S. banking sector.
Some companies may report worse guidance going forward as high oil prices and the catastrophe in Japan affect earnings in the coming quarters. It will be interesting to see how all the political events and natural disasters affect earnings results. I believe certain sectors of the economy will be hit worse than others, and investors will have to factor in these events.
All in all, I believe the first quarter of 2011, factoring all the negative news that dominated the end of the quarter, will be a good one. The positives of the U.S. Federal Reserve easing programs (QE II), the low interest rate environment and pliant fiscal policies continue to drive the markets higher. Until interest rates or taxation North America significantly changes, I believe this market will continue to move higher, even in the face of the global uncertainty from places like the Middle East and Japan. Investors should continue to buy good quality investments “on the dips” and look beyond the headline news of the day.
If you have any questions regarding the above article or are looking for an investment adviser to help you with your portfolio, please visit my website at www.investmentadvisorgta.com. I will be glad to speak with you!
Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities or Metro Canada.