Profit from the gradual recovery
US economic recovery is clearly under way. But is it a profitless recovery? Some bears say so. I don't agree. This year, corporate profits will not rise as much as the consensus forecasts. That's why I reckon that US Inc and the equity markets will recover at a canter rather than a gallop. But they will still rise sufficiently to support a 10% to 15% rise in equity prices by the year-end.
Recently, there's been a lot of consternation about the accounting standards used to measure US corporate profits. Enronitis has put the wind up equity markets. But there is a way through the smokescreen of reported corporate earnings results to see what is really happening to business profits in the US.
There are two ways to measure US corporate profits. One is to project company earnings results from the S&P500. But that is fraught with the problems that are now being revealed daily.