Macroeconomic Risk? That’s So 2012

February 13, 2013

So, is the market rationally valuing and netting out these data points to come up with
higher stock prices? Or is it a matter of finding bright spots to justify higher stock prices
that have been pulled higher by low rates
and higher asset prices in general?
-Tom West, director of equity research, Columbia Asset Management

Fourth quarter earnings are modestly beating expectations, albeit by less than the amount expectations were lowered during the quarter. And while every sector and industry is different, the market seemed to give companies (even with their cautious outlook for 2013) the benefit of the doubt they can manage through a tough demand environment. This may be based on a general belief that the risk of extreme events is dropping. Some “color” from some of the major sectors:

Tech companies selling into corporations saw a little lift in results in the fourth quarter, which many are attributing to a broad “budget flush” on the heels of very cautious spending in the first three quarters of the year. The bullish case for tech investment is that enterprise customers will perceive lower risk of global financial shocks, and expand their list of allowable technology investment from near term must do, to projects and system upgrades that have a good return on investment, but a longer payback period. On the consumer side of tech, things remain tough across the spectrum of goods — PCs, flat screen TVs, smart-phones, etc.

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