The Tone Is Shifting

 | Dec 19, 2013 | 11:29 AM EST
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The tone is shifting. I am talking about the tone at recent analyst meetings: General Electric (GE), Honeywell (HON), Johnson Controls (JCI) and 3M (MMM). These names still express caution over the macro environment. How can you not with Europe on shaky footing, China's stop-and-start growth and little growth in Latin America except for Mexico? When the U.S. and Germany are the engines, you feel better -- but not enough to have, or give, good visibility to your outlook. Plus, all four of these terrific companies are schooled in underpromising and overdelivering.

That said, they aren't focused on Washington any more. This is a major change. You lose that objection to growth, then you can be much more clear and confident in your outlook, and that's coming through. The fact is the Fed has made the job so much easier by telling us business rates are staying low. A combination of the government no longer being on the backs of the corporations and the Fed staying easy will be a godsend when companies start reporting in a couple of weeks. These positive analysts meetings are important preludes to more optimistic commentary about 2014 than we would have expected to hear out of companies as recently as two months ago.

In other words, the tepid outlooks that we heard on the previous quarterly calls may be tapered ever so slightly, which allows for more number-raising -- and number-raising is the mother's milk of higher stock prices. Plus, we no longer have much currency risk outside of Japan, which could lead to cutting numbers.

The setup is just much better, and the bulls have to be happy with the trajectory.



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