There are always multiple risks when investing and clearly the situation in the Ukraine and the flattening of the yield curve are worthy of real concern. However, we believe the positives still outweigh the negatives and for us the proof continues to be in corporate earnings, which have been much aligned and under-appreciated during the bull market. We are very early into this earnings season, (only 12 percent of the S&P 500 has reported) but we show about 77 percent are coming in better than expected which is higher than the long-term average and also last quarter at this same point. In addition, we show earnings for the S&P 500 are expected to grow by 11.92 percent year-over-year which is higher than a quarter ago as well as a year ago. The bottom line is, we believe the bottom line (earnings) are still impressive enough to translate into solid returns for equities in 2014 and a continuation of the bull market, but our senses are clearly becoming more cognizant of some warning signs that this bull market is aging.
Mike Boyle is a senior vice president, asset management, at AAM and a CFA charter holder.
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