The Weekly Update 5/30/2025™
My Kool-Aid Stand
If you and I each have a Kool-Aid stand, aka, a business, the key driver of its’ valuation out in the marketplace is how much it earns, its’ profits.
The average earnings estimate for the businesses of Corporate America going into 4Q2024 was for an increase of +7%. For 1Q2025 the estimate was for +6.4% growth.
What actually happened, per Zack’s Investment Research below, is 4Q2024 came in over 100% higher than estimated and 1Q2025 is also right at 100% higher than estimated.
Check it out.
With just those two quarterly data points you should wonder (i) how really smart Wall Street analysts can be off by 100% and still keep their job (ii) why the press wasn’t all over how good this actually is for the companies, the investors and our country as a whole.
In last month’s update of The Seven Signs of a Changing Economy™ under Sign #6, (Corporate Earnings) I detailed three Fair Market Value (FMV) scenarios. (Read it Here) I noted they were expensive, yet the markets themselves being a future valuation mechanism, suggested the valuations were not overvalued based on the positive growth in profits ahead. Especially about two quarters from now when the profits generated by A.I. start to expand the profit margins by – well, a lot.
The business press was not positive, so at least as wrong as the analysts. Do yourself a huge favor as we head into the low volume “summer doldrum” period (which tends to add volatility as the Jr. varsity takes over the Institutional trade desks of the world) and don’t listen to the business news.
The news keeps trying to tell us what every piece of minutia means when in reality it doesn’t matter.
Earnings do, and they are awesome.
Your news source is a tool to get your attention. They get paid Exactly Zero dollars to deliver you helpful, useful, fact-based actionable detail. Remember that and remember too, that here at The Wealth Strategies Group we sit on the same side of the table as you. We generally own what our clients own. If it doesn’t work, we get paid less. We don’t like that, so we are very focused on making your bigger, financial future work.
I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
*The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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