The third quarter earnings season begins Oct. 11 with the Alcoa earnings report at the market close. It should definitely be an interesting earning season to say the least. As earnings reports battle with the European debt crisis and the political environment, I don’t expect this season to go smoothly. In fact, I wouldn’t be surprised to see stocks fall on great earnings reports, when news comes out of Europe.
The Third Quarter Review
The story for the past three months has been defense. We’ve seen the Dow drop from its highs of the quarter, about 12%. The worst single quarter decline since Q1 2009, thanks to the debt ceiling crisis, political infighting, and increased global economic fears. The market’s been extremely volatile for much of the quarter. Even those with iron stomachs must have felt squeamish at times.
After the initial August plunge from the US debt downgrade, the markets were on a steadily declining trading range based entirely on European economic woes and mixed US economic data. Fairly nauseating to say the least and I for one am hoping for calmer waters ahead.
The few bright spots, gold saw a new high, topping $1,900 an ounce thanks to protection seeking investors. If you thought Treasury rates couldn’t get lower, the Fed proved otherwise. By initially hinting at prolonged lower long term rates and then forcing Operation Twist, they sent rates down further. Making long term Treasury investments, as a safe haven play, almost risky.
In turn, Operation Twist dropped mortgage rates to all time lows. Offering up a great opportunity for anyone who can refinance a mortgage or buy a new home.
What You Need To Do
Whether you’re invested in stocks, bonds or mutual funds, now is the perfect time to do another quarterly investment review. Finding out how well companies are faring will give you a better basis to adjust your portfolio accordingly. See what’s working and what isn’t, take profits were you can and rebalance if necessary.
For those who favor stock investing, take the time to review conference call transcripts. Put a shopping list together of potential investments. If you’re looking to invest new money into the markets, I would suggest holding off until after Europe finalizes their debt crisis. There’s no reason to jump in right now with so many unanswered questions.
Take advantage of any new information you come across and adjust your investment strategy as needed. Do a little homework. You’ll profit in the long run.