In our newsletters we’ve been talking about two main things unfolding in the coming months,
1) P/E Compression and 2) an economic test
The P/E compression appears to happening quite clearly. Again, this can lead to frustration as companies post solid earnings but yet their shares decline or stay flat. This will test and try people’s patience and will be a War of Attrition, if you will.
On the economic test, here is what we’ve said in our newsletter…
An economic test will occur with tougher year over year comparisons in late 2010.
This could prove to be a double dip recession, the key will be how deep it is and how long it lasts.
Frankly, this is the wait and see part of the test. No one knows if we will dip again or not. People are placing bets on one side or the other, but I sincerely doubt anyone knows for sure what is going to happen. This uncertainly is precisely the reason for the contracting P/E’s.
With all this in mind, our eyes and ears are wide open to incoming data in an attempt to find clues regarding this test.
