It's a busy week ahead for earnings from US Bellwethers and investors will be watching for indications that optimism in the markets is justified by corporate results.
We are fast leaving behind the time that beating earnings because of cost efficiencies is sufficient to justify current multiples. Revenue growth must also return.
No one is looking for a return to revenue numbers from two years ago, but improvement during the last six or 12 months is certainly needed; this outcome would fuel further optimism in the market if these numbers are exceeded.
However, as you listen to the numbers, it's just important to watch for the language used by management.
And don't, for a second, assume that they will be necessarily transparent when they describe what they see the future to be in terms of earnings potential.
Company executives tend to be fairly conservative after a dramatic downturn as evidenced by the earnings calls from Caterpillar over the last two quarters.
Management was extremely gloomy six months ago when discussing future prospects. Now they appear to have evolved to cautious which is a vast psychological improvement. It's no wonder Caterpillar stock has done well the last 6 months - their outlook has become less dire and management was conscious in discussing future prospects.