Investing is as simple as A, B, C

Investing is as simple as A, B, C

Time to read: Minutes
Douglas Cote

Douglas Coté, CFA

Head of Global Perspectives Strategies

The incessant fire hose of macro data is confusing professional and retail investors alike. That is why we advocate to instead to focus on the microeconomic, bottom-up factors, or more simply, the fundamentals. The fundamentals are the A, B, Cs of investing. Let’s look at a current reading of the ABCs to show you what I mean, how simple it is and how the clarity is only surpassed by its insight.

A — advancing corporate earnings of the S&P 500 for the last six quarters have been positive. So far in the second quarter of 2022, with 356 of 500 companies reporting actual earnings, the year-over-year earnings growth rate is 8.4%, blowing away expectations of 5.6% as recently as July 1.

B — broadening manufacturing, as indicated by the ISM U.S. manufacturing and services indexes. Currently, the ISM manufacturing index has stabilized, ticking down to 52.8, but still indicates expansion. ISM services bounced to 56.7 in July, breaking a downward trend and consistent with our annual forecast of continued strength in services. Manufacturing is one of the biggest drivers of capital equipment purchases — a big component of GDP.

C — consumer spending, is once again a gamechanger by defying calls for its demise. The June U.S. retail sales figure was a blockbuster with a record high of $680.6 billion. Consumer spending is nearly 70% of the economy, so where the consumer goes the economy goes.

For more in-depth analysis on my call for a resilient market based on, you guessed it, the ABCs, please review my recent mid-year outlook: Mid-Year Outlook: Market Resilience

 

Voya Investment Management has prepared this commentary for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security r (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. Past performance is no guarantee of future returns.

The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Strategy holdings are fluid and are subject to daily change based on market conditions and other factors.

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