Europe’s talks are proceeding but the end is so far down the road that it's like running a 100-kilometre ultra marathon.
Most people who complete a marathon - including the Greek guy who got it started years ago - can complete an ultra. In many cases it is the one who is still standing at the end who wins. At the start however it's rarely clear who has that inner stamina. Who has the extra incentive to push when everyone else around them slows first to a shuffle, then a staggered walk and then sits or collapses to the ground?
Both the French and Germans are pushing for separate resolutions. Some compromise will be needed to move forward. Who has more to lose?
France's credit rating is in danger but so what? The loss of its top rating, for the US, hasn't brought the world's biggest economy to its knees. Yes, there have been costs but the economy is expanding now and in many ways it can be argued that the healing process is entrenched, albeit it's a super slow acceleration.
As for Germany, the biggest risk is a political one. Is Angela Merkel willing to put her career and her government's future on the line? One could argue that die has been cast.
Investors, buoyed by some solid US earnings, have propelled Wall Street higher for three weeks. As long as European policymakers continue to push forward or at least appear to be moving forward, there is optimism to lift stock prices.
On the agenda this week are agenda are results from more top S&P 500 names: Caterpillar, Coach, Boeing and Procter & Gamble among others.
The data shows S&P 500 earnings are expected to have risen 14.7 percent in the third quarter from a year ago, compared with an October 3 estimate for 13.1 percent growth, Reuters says. And while the outlook is less sure, given the debt crisis and the outlook for Chinese growth, companies are still making money.
Projections for the fourth quarter are for growth of 12.5 percent - down from an Oct. 3 estimate of 15 percent - and forecasts for the first quarter of 2012 are for growth of 7.6 percent - down from an Oct. 3 estimate of 10.2 percent, according to Reuters.
“The earnings so far have implied that we’re not in a recession,” Ralph Shive, the South Bend, Indiana-based manager of the Wasatch-Large Cap Value Fund, told Bloomberg. “They were pretty stable and a slight positive as opposed to falling off the cliff.”
On the US economic agenda this week is a reading on third-quarter growth.
Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate after advancing 1.3 percent in the previous three months, according to the median forecast of 68 economists surveyed by Bloomberg News before the Commerce Department’s October 27 release.
And that's the key. It's simply the stage of the race. It's difficult to know where we are at the moment because we haven't seen any distance markers and no aid station volunteers are willing to say how far there is left before the finish. But as long as there is continued forward progress, investors will be able to look ahead.
(BusinessDesk)
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