top of page

The Best Companies Will Thrive

Monetary and fiscal indicators have continued to tighten significantly. Negative money growth, an increasing fiscal deficit, rising real interest rates, an inverted yield curve and central banking guidance of higher short-term interest rates had led to the most anticipated economic recession in the past 40 years. And yet… the U.S. economy continues to move higher, spurred by strong consumer spending (which accounts for roughly 70% of economic activity), technological advances and a resilient industrial sector. Economic growth in the second quarter was 2.4% and inflation is falling at the fastest pace in history.


Consumer spending has been supported by a low unemployment rate and the drawdown of savings brought on by the unprecedented government payments made during the Covid shutdown. A pickup in capital spending has been spurred by companies building more resilience in their supply chains after experiencing significant issues during the pandemic and political fears related to China.


Company managements have been adept at managing in this environment, including exploring the cost, quality and time saving opportunities of artificial intelligence (AI). That is evident in the earnings reports for the second quarter. According to Bloomberg, with over three-quarters of the S&P 1500 companies reporting their second-quarter results, earnings have been 7% above consensus expectations with positive surprises in all 11 economic sectors.

Of course, not all companies will adapt equally, but many companies will continue to grow as consumers make countless numbers of buy and sell decisions every day. Some companies will improve profit margins and gain market share via superior execution. They will gain market share because their strong balance sheets will allow them to invest for better productivity while competitors are locked out for lack of capital. They will identify new opportunities with creativity and innovation. Progress requires constant experimentation from numerous individuals and entities.

Opportunities abound for well-run companies. As investors, investing in the best is rarely a bad idea.

Recent Posts

See All

Stock Prices Chase Earnings

“ In the short run, the market is a voting machine but in the long run, it is a weighing machine.”   ―  Benjamin Graham The stock market...

Jobs, Stocks, and Election Dynamics

As discussed in our July letter, the narrative continues around two markets: the economy and the stock market. The latter of the two has...

2nd Quarter Earnings Are Key

In terms of earnings, stock performance, and valuation, this continues to be a tale of two markets.  The ten largest stocks by market...

コメント


bottom of page