Corporate earnings in the U.S. have largely been overshadowed by ongoing concerns over public debt in the European continent. But if one takes the time to look past events overseas and focus on earnings numbers from U.S. firms, most have surprised on the upside.
What was a pretty negative perspective on the U.S. economy certainly seems to have changed particularly relative to the eurozone.
Despite all the epitaphs written about the U.S. economy, the country seems to be slowly but surely coming together again as we see relatively good numbers this quarter.
Companies such as Cisco and Google have reported not only surging revenue, but have also stuck their necks out with bullish predictions of healthy recovery.
The question now is on the future earnings trajectory for US companies. What should our expectations be for stock price movements relative to these earnings reports?
As is always the case, stock prices move relative to intrinsic value and the dynamics of market psychology. In other words, expectations of good or bad news are layered on top of the actual real value of a given company.