Ever see someone in an elevator neurotically pressing the floor button of their destination in an effort to expedite closing the doors? Are you that person? It's OK if you are. But you have to ask yourself if pressing that button is really going to make a difference.
Why not just gracefully enter the elevator, press the button once, smile at your neighbor, and wait for the door to close? Arrive at your location on the elevators' schedule, with respect and marvel at the mechanics, power and engineering consumed to get there.
This silly analogy is what this market feels like at times such as these. Everyone is calling for the elevator to come down, only so we can all enter at the same time. Unfortunately, when the elevator finally does approach, not everyone enters as they plan to. Sticking to an investment plan of action is of utmost importance.
Stories of underinvestment, the jittery and frustratingly slow macro landscape, redemptions from actively managed funds and under-performance of the Transport group send us contrarian cross-currents that point to a downward skew in the market. Some think the market is expensive; others think it is full; and some actually think it is cheap. It really all depends on earnings!
Well-telegraphed undertones of concern emerging from European banks in the aftermath of Brexit continue to cloud the ability to construct a confident investment thesis. Contagion is possible. But watching the start of earnings season is likely more important. Should earnings, especially in the more economically sensitive pockets of the market, come in decent, we should be in for a strong end to the summer.
So far, reiterations from United Technologies (UTX), Whirlpool Corporation (WHR) and this morning's "decent" earnings report out of MSC Industrial Direct (MSM) seem like a good indication that forecasts appear consistent with the realities of the present.
We have also heard from CLARCOR (CLC), AZZ, Inc. (AZZ) and Acuity Brands (AYI) recently. These lightly discussed, but economically meaningful companies, showed "more of the same" results and nominal volatility around near-term share prices.
A "Tale of Two Earnings Seasons" could emerge here in the second quarter. So far, as we enter the first portion of earnings, things appear calm. I wonder what the second half of it will bring.
Wait for the elevator. And be patient while pressing the buttons.
