Sunday, April 10, 2016

GLOBAL EQUITY MARKETS TO REMAIN VOLATILE AND MORE PAINS AWAITED


The current market scenario is tough and its going to be tough as months will progress. I wanted to keep the entire message to be short so that one can get a idea about how to go ahead. India ,US and Chan will come up with its quarterly results which will keep the global equities and bond markets under extensive volatile.US corporate profits are going to plunge as dollar and manufacturing base have been low. The US economy might have grown but the corporate profits will be devastating which will also affect the global markets in the coming weeks. Further as more US election days will come forward the investment climate will stall and more focus will be after elections. According to the Department of Commerce corporate profits before taxes fell 11.5%, by nearly $160 billion, from a year ago.

For the year, profits decreased $64 billion, compared to an increase of $35 billion in 2014 from the year before. This time the profits will not be coming down only in energy segment. Ancillary industries and manufacturing will be taking a hit. According to factset  of the 119 companies in the index that have issued earnings guidance for the first quarter this year, 93, or 78%, of those companies have warned they are likely to miss estimates. Of course, companies are likely to pre-report if its going to be bad news to blunt the blow. Still, this quarter’s negative pre-reports is above the 5-year average of 73%. Now those who are betting on that DowJones and S&P 500 will bounce back better be careful. The trigger of stock by back using Zero interest rates funds no longer exists.  Hence by back based stock price making new highs is over. Share repurchases decreased 3.4%  in the fourth quarter from the previous three-month period and are tracking at a 21-month low in March, according to respective data from S&P Dow Jones Indices and TrimTabs.  Companies have been using reductions in share count as a way to boost earnings profiles, raise stock prices and reward corporate executives. Capital goods orders have also declined which reveals that manufacturing affect will be reflected in the quarterly results.

 If we look at the 4th quarters we find and with profits after tax, without inventory valuation and capital consumption adjustments, falling at an annualized rate of 8.1%  from the third —the largest quarterly decline since the first quarter of 2011.Year-over-year, corporate profits declined 3.6% in the fourth quarter, but for all of 2015, profits were up 3.3% from 2014.  Getting further into the numbers its being found that after-tax adjusted profits, which more closely reflect profits on production during the quarter, fell 15% in the fourth quarter from a year earlier, the steepest year-over-year drop since 2008. The largest profit decline came in manufacturing, especially in production of petroleum and coal products. Profits will fall along with that he corporate defaults will also begin and considerable delay in bond payments will strike the global economy.

At home the Indian economy will face a severe draught situation as extensive heat has already taken strong hold of people across cities.  Severe drought conditions prevail at the moment in at least 10 states in India. Maharashtra, Rajasthan, Madhya Pradesh, Gujarat, Haryana, Andhra Pradesh and Telengana are all staring at a bleak summer, already experiencing severe water shortage, with at least two months to go for the monsoons. People don't have water to drink, cook or perform their daily ablutions across vast tracts of the state. In Latur, two big hospitals reportedly stopped surgeries due to lack of water and several agro-based industries had to shut down, forcing migrant laborers to return to their home states. Inflation will grow and this will create limitation on consumption segment over the long term. Farmer’s suicide cases will grow and Indian government will face some hard times in between in passing policy reforms.
In between the problem of falling profit don’t restrict to US-china and Europe will also join the race.  Nifty will be volatile and will ride some of the hardest times since Indian banking results will come up with more NPA which will keep markets under pressure. The 4th quarter results of India will be another volatile phase which will lead more investors to sit on cash. Well China is still awaited to be covered.


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