Unusually Uncertain

Listening and reading recent reports of mainstream media outlets could make one wonder if a new meltdown of the financial system is at hand.  Headlines about double-dip recession, plummeting housing starts and consumer sentiment dominate the news.  To be sure, latest batch of overall economic reports has not been stellar.  Yesterday, markets dived after Fed Chairman Ben Bernanke said that the outlook for the economy was “unusually uncertain”.  Really?  Has it ever been unusually certain?

Right now, the earnings season is in full swing and company reports so far contradict doom and gloom.  After many bellwether companies, such as Intel, Apple, Alcoa, Morgan Stanley, Caterpillar and others not only beat estimates, but offered higher guidance going forward, investors are finally beginning to take notice.  Ultimately, it is only the earnings that drive the stock prices.

Here’s a quote from one of 20 golden rules by Peter Lynch, that I think is particularly applicable to today’s environment:

“Nobody can predict interest rates, the future direction of the economy, or the stock market.  Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you are interested”.