The Long Term Investor

Talk about MEANINGLESS.....this is definately true.....any and all GUIDANCE is now totally inaccurate.:

How to Think About the Stock Market When Earnings Guidance Becomes Meaningless

https://finance.yahoo.com/news/think-stock-market-earnings-guidance-093000938.html

(BOLD is my opinion OR what i consider important content)

"Economist Burton Malkiel might have called the stock market “a random walk,” but investors could at least use earnings guidance by companies as road signs. Now they are largely walking blind.

Last week, BMW reiterated its 2025 financial guidance from mid-March, but included the assumption that the Trump administration would roll back some of the more-recent tariff increases starting in July.

Though it will take a while, free trade across the U.S., Mexico and Canada “will be restituted once again,” BMW Chairman Oliver Zipse told analysts last Wednesday. “The disadvantages are far too big for everybody.”

Given that the U.S. and China agreed Monday to suspend most tariffs, following the announcement of a deal with the U.K. last week, there may be some ground for Zipse’s optimism. But equity analysts at Deutsche Bank weren’t as certain following the earnings report. “Obviously not everyone shares BMW’s optimism,” they wrote to clients.

While unorthodox, the German carmaker’s predictions are one way to cope with the fact that nobody knows what the economy will look like in a few months’ time.

Ford, Jeep-owner Stellantis, Delta Air Lines, and UPS took another route, scrapping their 2025 guidance altogether. Others, such as General Motors, PepsiCo and Procter & Gamble, have lowered targets, while Volkswagen excluded tariffs from its outlook. United Airlines, creatively, offered one scenario for a stable environment and another for a recession.

The current median expectation by Wall Street is that the S&P 500’s earnings-per-share growth over the next 12 months will be 8.9%, which amounts to a forward price/earnings ratio of 20.6—historically elevated but in line with the average of the past five years.

Here is the problem: Analysts take their cues from the same corporate executives who are now issuing meaningless forecasts. In reality, the index could be much more expensive than it looks.

Goldman Sachs still sees a 45% chance of a recession over the next 12 months. Yet, after almost entering a bear market on April 8, the S&P 500 is now only about 4% below where it was at the start of the year.

To be sure, a downturn is less likely than a month ago. President Trump has de-escalated his trade war, and official data for April showed no big deterioration in the job market, contradicting what “soft” survey indicators were suggesting.

Also, analysts aren’t fully oblivious to the risks ahead: Despite first-quarter earnings figures coming in strong and more companies than average upgrading their second-quarter guidance, brokers still revised down their estimates for the second quarter by 2.4% in April—much more than they usually do. And they are applying larger downgrades to forecasts starting a year from now or later, which has historically been a decent predictor of the economy cooling.

An argument can thus be made that investors are factoring in some chance of a recession or at least a severe slowdown, but also balancing that against a potential economic pop once U.S. consumers and businesses, which still have strong finances, make it through the next few months of chaos.

This doesn’t really make sense, though. Even if economic uncertainty itself ends up having no ill effect, it has now been confirmed that Trump’s trade deals will leave many of the recently announced tariffs in place, which means import-cost increases are coming. Companies will soon need to either accept lower margins or push up prices, which will affect sales.

Crucially, forward profit expectations for the S&P 500 and technology stocks in particular were already being downgraded before the trade war started. For reference, recessions typically involve a fall in earnings of 20% or more.

Assuming a very benign scenario in which earnings-per-share growth fell simply to the five-year average of 7.9% and the forward P/E ratio rose back to the maximum around which it has hovered in recent years, which is 22, the S&P 500 would still have only about 6% upside. That isn’t much when cash yields 4%.

Rather than focus on shaky forecasts, however, investors “may start gravitating toward looking at trailing earnings, because those are the ones that are real,” said Matt Stucky, chief equities portfolio manager at Northwestern Mutual.

They might already be doing that to a certain extent. Cheap “value” stocks, which have been very unloved over the past decade and a half relative to fast-growth Silicon Valley giants, have become the outperformers this year.

“There isn’t a whole lot of hope priced into value stocks, but valuation gives you a cushion whereas hope doesn’t,” said M&G Investments’s Fabiana Fedeli.

But this could ultimately make for a pretty bearish overall market, given that the promise of artificial intelligence remains the cornerstone of the U.S. investment case. If backward-looking P/E ratios are to be believed, valuations are extremely frothy, not far from those of the dot-com bubble.

Wall Street veteran Jim Paulsen proposes another rule: Since the end of World War II, S&P 500 returns have closely followed a logarithmic line upward. And, while the current upward deviation isn’t close to 1999 levels, returning to the trend over the next year would still imply a 15% fall.

Perhaps investors should just diversify as much as they can and have a bias toward “quality” companies with features such as balance sheets that can withstand extreme outcomes. Avoiding China-focused names such as Apple, this could argue for keeping the faith in market favorites such as Costco, Meta Platforms and Mastercard.

Still, none of today’s obscured investment paths might lead to particularly large gains."

MY COMMENT

This little story is WAY overly negative. Earnings are the key to the future and I see EARNINGS being just as good over the remaining quarters this year. With the extreme moving environment we are in right now....NO ONE....has any clue about guidance or market prospects for the year. It is ALL.....simply BS.

We will all just have to wait and see how it all plays out in real-time. After all....that is what we do anyway as long term investors....so WHO CARES.

I know one thing FOR SURE......any bias of the predictors will be to the NEGATIVE....so there will be an ENHANCED chance that any surprise will be to the UP-SIDE. AND....judging by the predictive record of the "EXPERTS"....they will be WRONG AS USUAL.

 

I have now improved some for the day in my account. I now have ONLY two stocks that are RED.....COST and WMT. Being sellers of products that come from China...you would think both these companies would be up BIG based on the news today. I guess they are being hurt by the PROBABILITY of a good economy. For COST a good economy will NOT matter.....their members are.....CRAZY LOYAL.

I got gas at a COSTCO a few days ago. EVERY pump had a line of 6-8 cars and the price of gas there was.....40cents....to 50cents.....below all other stations in my area. The only negative is their limitations on what debit or credit cards they will take.....VISA.

 

SELL IN MAY AND GO AWAY? I dont think so. I hope no one on here did. BUT it is "YOUR" choice since it is "your" money. If that is how you wish to invest and trade......go for it.

 

LOVE IT:

Amazon, Tesla stocks lead 'Magnificent 7' surge after US-China temporary trade truce

https://finance.yahoo.com/news/amaz...us-china-temporary-trade-truce-123106949.html

 

One hour to go and the markets are.....STRONG, STRONG, STRONG. COME ON. We need to keep those gins for another hour and lock them in.

 

YA THINK?

Wall Street's worst fears over Trump's trade war just faded

https://finance.yahoo.com/news/wall...er-trumps-trade-war-just-faded-154642890.html

 

Regarding the above....the good thing is....there are STILL a HUGE number of hot items that are waiting to be resolved, reported, or seen. There is a HUGE amount of pent up pressure items just waiting to positively impact the markets over the next 1-6 months.

The tax bill.

Many more tariff deals and continued negotiations.

The FED rate cuts.

Inflation going down even more...even though it is strongly in the normal range right now.

The MOMENTUM that will come from a booming market as it feeds on itself.

MORE great earnings that will come for BIG CAP stocks in particular.

Peace in Ukraine.

Massive amounts of money sitting on the sidelines that will come back into the markets.

AND...probably a few more that I am not thinking about. these are ALL short to medium term events....
BUT....individually and together will have a big impact on the markets over the remainder of 2025.

it will be exciting, interesting, and hopefully most of all....FUN. Even if it is NOT FUN...it will still be exciting and interesting.

 

We’re living in two separate economies’ — why young Americans feel stuck, financially

https://www.cnbc.com/2025/05/12/millennials-struggle-financially-despite-higher-earnings.html

MY COMMENT

RELAX. We have all been there. It was the same if not worse for all the generations that came before from the 1950's to now.

I know you dont know this or even believe it but this is the.....TRUTH. We all felt stuck financially when we were younger. Most of us struggled to buy that first home. Most of us struggled to save and invest. Most of us still struggled even as our incomes went up and our net worth increased. It is a function of time...to feel like you are making progress. It WILL happen...but it takes time.....and even as you are moving forward and progressing....your brain does not see it because you get used to your....new normal.

No the middle class life is not dead or unachievable. In fact many of the people that think they will not get there are already there....they just dont see it.....especially compared to generations of the past.

We had only one car....a beater. We had NO dishwasher or washer or dryer. We lived on $600 a month....two $300 a month jobs. A good salary for a new college grad was $700 a month. When I graduated from Law School...my friends that went into practice were starting at about $1000 per month. Our first house was a HUD foreclosure, under 900 sq feet in a borderline neighborhood. ETC, etc, etc.

AND....as we moved up it still took years to feel like we were making progress even with our income going up and a better house.....(with a 12% mortgage).

Everyone has high expectations these days.....but....through most of the time span from 1950 to today....it usually takes into your mid 30's to mid 40's to really see progress in your life. that is just how it is and has been for many, many, generations.

Like I said...it is just a....FUNCTION OF TIME......and...EFFORT. Doing all the right things....till they start to snowball.

 

UP....BIG. I have now progressed to only a single RED stock. Thirty minutes to go. Got to HANG ON....just hang on.....and....LOCK IT IN.

 

You are so right Blake.

That cup of fancy coffee every day is costing many people about....$200....per month. I would hate to see the bill for all their food delivery services and streaming services.

We were happy when my wife's boss gave us an old used washing machine that was about 15-20 years old.....but......it still worked. We had no dryer...so we still had to haul everything to the Laundromat to use the dryer. Living in the rain pf the pacific NW...a cloths line was not a good option.

Even now when we are financially secure...we still try to drive our vehicles into the ground.

 

A HUGE gain for me today. I have now got my loss down to.....(-1.80%)....for my entire portfolio.

LOL....I think it is funny when my goal is to get back to....ZERO....for the year. Of course when I get back there my goal will be to get to my 10% or better by year end.

I ended today with all nine stocks in the GREEN. Plus a good beat on the SP500 on a big gain day...... by 0.97%.

If we can get some carry-through tomorrow I will have a shot at getting back to ZERO. If not tomorrow perhaps by Friday....if the CPI and PPI do not screw me.

 

The market today.

Dow jumps more than 1,100 points, S&P 500 rises 3% on China-U.S. temporary tariff cut: Live updates

https://www.cnbc.com/2025/05/11/stock-market-today-live-updates.html

YEA....for us all.

 

LETS DO IT AGAIN TOMORROW.