The curtain is about to be pulled back on the U.S. economy when earnings season gets underway. We can expect a very mixed set of results for the S&P 500, as evidenced by some preliminary reports that crossed the tape in the past month. While business at Monsanto (NYSE:MON) is straight up, Nike (NYSE:NKE) “dropped a shoe,” so to speak, last week with its downside surprise. Even as shares of Coca-Cola (NYSE:KO) hit new highs, shares of McDonald’s NYSE:(MCD) are down 20% from their January high. The comparisons go on and on.
As I was combing through the new 52-week highs list from Investor’s Business Daily, I was surprised to see how many commercial-property stocks were on the list — a disproportionally high number, to be quite frank.
My takeaway from that observation is that, if things are as bad out there as the economic data implies, then why are so many operators of office space, industrial warehouse space, medical parks, strip malls and other commercial property seeing their shares so handsomely rewarded? Either the very bearish sentiment reading from the AAII last week is accurate or the economy is set to pick up some speed later this year when few people are expecting it.
It’s best to remain unbiased about what the tape is trying to tell us, even in a highly charged election year where rhetoric is just ramping up to fever pitch. The market senses that Europe won’t come unglued at the seams, China likely will orchestrate another banner year of close to 8% growth, and the year-end fiscal cliff dilemma will get pushed out until the second quarter of next year when the possibility of a genuine consensus on budget and tax policy can be ironed out. This may sound rose-colored to some, but if it weren’t the case, the S&P would be trading well under 1,300 now.