Focus on Fundamentals More Than Ever

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The majority of headlines this week focused once again on the Federal Reserve and interest rates. Last Wednesday, the Fed’s March meeting minutes were released.

Federal Reserve Operation Twist

Investors drove the stock markets higher this week in anticipation and expectation that interest rates would remain near zero given recent soft economic data, specifically last week’s disappointing payroll report.

On Friday, April 3, the Labor Department announced that only 126,000 new payroll jobs were created in March, which was well below economists’ consensus estimate of 243,000. It was also the first time in a year the U.S. economy failed to create at least 200,000 payroll jobs per month.

What’s interesting is that this report had no bearing on the Fed minutes last week, as they were recorded at a meeting in mid-March. Still, the poor jobs report coupled with recent weak economic data is sure to give Fed Chairperson Janet Yellen and the rest of the doves more fodder for keeping interest rates ultra-low in 2015.

There remains some division among Fed officials over when to raise interest rates. Given that inflation remains below 2% and the threat of deflation is spreading, some prefer to delay the interest rate hike to later this year or even 2016. Of course, there are still some hawks pushing for June.

However, the March minutes noted that the Fed wants to see more improvement in the jobs market and inflation make a move back toward 2% before raising rates. So, given the March jobs report, the recent decline in the ISM manufacturing index, falling imports and the fact that crude oil prices fell again on surging inventories, the Fed has plenty of reasons to delay any interest rate hike.

It’s also worth mentioning that the Fed funds futures are now predicting that the Fed won’t raise interest rates this year. So, I’m still in the camp that believes the Fed won’t lift interest rates in 2015.

Aside from the Fed’s March meeting minutes, the other big headline this week was the official start to first-quarter earnings announcement season. Alcoa Inc (NYSE:AA) released first-quarter results after the market close on Wednesday, missing analysts’ revenues estimates and beating earnings estimates by two pennies.

The market sloshed for the better part of Thursday, as investors weighed what this meant for first-quarter earnings season overall.

The U.S. dollar continues to hurt the top and bottom lines of most multi-international companies — and Alcoa is just the first of many that will disappoint in the coming weeks. Right now, fundamentals are more important than ever, which is why we continue to focus our attention on small- and mid-cap companies with strong sales and earnings projections.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/focus-on-fundamentals-more-than-ever/.

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