Will the second quarter treat us as well?
Today's Financial News - Posted March 31, 2009
The first quarter is over. Now we will get a true sense of the nation’s health. If the nation’s largest companies cannot pass this physical — starting with Alcoa (NYSE:AA) next week — we are in for a wild ride.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It’s over. As of the close of business, the first quarter of 2009 will go into the history books.
I say good riddance.
The quarter felt like a long one, with an historic inauguration, a 30% slide in the equity markets, corporate scandals, incredible growth in Washington and a quasi-takeover of the nation’s auto manufacturers. To top it all of, March turned out to be the best month in more than six years for Wall Street.
But we all lived through the past. We know what the last three months brought us. What about the future?
Let’s get out my crystal ball.
The rest of the year is not going to be nearly as rosy as many investors are betting. Just a month ago, the nation was contemplating the “D” word, but then somebody told Obama to change his rhetoric. As he did, the market’s rebounded and the word depression has not been mentioned since.
It was the “messiah’s” first miracle.
He’s no saint, yet
Unfortunately, Americans will not fall for bait-and-switch act much longer. As the nation’s companies close their books and Q1 earnings reports begin to trickle in, the numbers will not lie. And they cannot be spun by a savvy press secretary.
We will get the cold, hard truth about the health of nation’s economy. There will be a pulse, but it will be a weak one.
Alcoa (NYSE:AA) will be the first company to open its books when it reports next Tuesday. If it misses expectations by anything more than a rounding error, expect the markets to punish the company and anything remotely related to the metals or mining industries.
But the outlook is not entirely bleak. Remember, markets hate uncertainty. As the Obama administration crosses items off its gigantic to-do list, the nation will have a better understanding of where we are headed.
The equities market responds to risk in an inverse fashion. The higher the risk, the lower the prices. Eliminate risk and you can expect a surge in prices.
As earnings reports hit the Street and corporate outlooks are hashed out, investors will have a better understanding at what the rest of a tough year looks like.
The banks and their inflated outlooks gave us the surge in March. Now it will be up to the remainder of the market to ensure we continue on this bullish path.
If not, the bears already have their claws sharpened and are ready to flex their muscles.
Next Article: Apollo Group: Not so hot for teacher
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