In this commentary we discuss the current earnings season. The majority of US companies have reported their Q1 results by now, and by and large the numbers have been very strong. Earnings growth in aggregate has been well over 50% on a year over year basis. However, to be fair this strong growth is largely the result of very easy comparisons as last year’s first quarter was an extremely difficult one due to the turbulent economic backdrop. That being said, earnings have exceeded analyst expectations by an impressive magnitude of over 15%. Perhaps most important of all, sales are growing in the low double digits, also exceeding analyst expectations. This is significant as cost cuts are no longer the sole driver for bottom line growth. While expense reductions have been very important in supporting corporate profitability, top line growth is a more sustainable earnings driver and is emblematic of an improving economy. These results support our near term sanguine view of the market. While we are cognizant of the risks emanating from a weakened European economy and the Greek fiscal crisis, and have modestly raised our risk management tools accordingly, in the aggregate we remain opportunistically positioned to benefit from a rebounding domestic economy.
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Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.
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