When a Good Multiple and Jobless Rate Aren't Enough

Two Big Themes this week:

1. Central banks are still buying

2. Unemployment is still a problem

Many investors aren't excited about the decline of headline unemployment to 7.4% when fewer people are being counted in the labor force, average wages are declining and employers create fewer jobs than forecast. Now we know WHY the Fed is buying.

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While the market's all-time high this week suggests the Fed is winning, even bulls need more than central bank sugar to justify committing new capital. They need a more fundamental reason to buy, especially with the S&P 500 trading at 16.1 times earnings, compared to an historical average of 14-17 times earnings, according to Citi strategist Tobias Levkovich. Allow us to propose three little words:

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So far, 343 companies have reaffirmed or updated forward guidance since earnings season began July 8. Only 16 of these have told analysts their earnings will grow at least 5% over the next 12 months. We note their stocks are up an average 29% YTD, well above the S&P 500 Index.

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As an added bonus for blog readers, we note three companies reporting next week whose estimates were raised THIS week by the analysts tracked by Bloomberg: CF Industries (CF), Molson Coors (TAP), NRG Energy (NRG).

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