The Day Ahead: Don't Fear the Unknown

What? You thought this was to be another quantitative-easing rundown gleaned from combing four years of Helicopter Ben comments and random YouTube videos? Nah -- been there, done that (for most of August). At least for today, I want to expand upon a couple hints I dropped Monday regarding third-quarter earnings season. Sure, everywhere you turn there is talk of QE-associated tail risks, mouth risks, hoof risks and the like. But a very empty bucket is out in the open labeled "Corporate Fundamentals Now." There is this earnings recession that I have outlined recently, and the concept of leaky profit margins, but I want to tie it all together in order to maximize your preparedness.

The reality, as I see it, is that the market is headed for a series of judgment days during which investors -- both of the deep-pocketed variety and the retail Johnny-come-latelies -- will have to make a choice. They'll all have to decide whether significantly accommodative global monetary policy, plus China infrastructure spending, are valid enough arguments to further expand price-to-earnings multiples on decelerating earnings growth and fiscal-cliff threats (though, hello, there is no real demand in China to be quantified just yet). Then, investors will have to square their decisions with sell-side estimate modeling for a revival in profit growth by the fourth quarter -- the underpinning of fresh upward adjustments to strategists' year-end S&P 500 value targets....578 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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