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00:00IS WITH US. ALSO, JEFFREY ROSENBERG. KEVIN, WHAT IS GOING ON WITH EARNINGS SEASON? KEVIN: OUT: NOT GET OFF TO A GREAT START. I THINK SO MANY COMPANIES AND ANALYSTS HAVE REVISED ESTIMATES DOWNWARD. SUCH PESSIMISM HEADING INTO THIS EARNINGS SEASON THAT THIS SETS US UP FOR POSITIVE EARNINGS SURPRISES. GENERALLY WE ANTICIPATE A 70% BEAT RATE WITH EARNINGS ESTIMATES EVERY QUARTER. I THINK WE COULD BE IN THE 75% PLUS RANGE ACED UPON REVISED ESTIMATES. I THINK EARNINGS WILL BE GREAT, NO. I THINK EARNINGS WILL BE BETTER TOWARD THE SECOND HALF OF THE YEAR, YES. I THINK THAT SETS THE STAGE FOR THE SECULAR BULL MARKET. VONNIE: ARE YOU CASTING AN ARGUMENT FOR CATALYSTS? THE FIRST QUARTER LAST YEAR WE SAW THE BIG DROP IN BACK TO FLAT AND ENDED THE YEAR FLAT. WHY SHOULD THIS YEAR BE THE SAME? KEVIN: I THINK IT IS DIFFERENT. LAST YEAR WE HAD WEATHER-RELATED ISSUES THAT PLAGUED THE FIRST QUARTER. THIS YEAR WE DON'T NECESSARILY HAVE THOSE ISSUES. WE SEE A RISING TIDE AS IT RELATES TO THE GLOBAL ECONOMIC RECOVERY. I UNDERSTAND THE IMF CAME OUT AND REVISED GROWTH ESTIMATES DOWNWARDS THIS MORNING BUT WE ARE STILL LOOKING AT 2% PLUS IN THE POSITIVE. THE RISK OF A GLOBAL RECESSION IS LOW SO I THINK IT SETS THE STAGE FOR A GOOD SECOND HALF OF THE YEAR. JON: I KEEP PUSHING THIS POINT SO PUSH BACK. THE S & P 500 IS TRADING AT 17 TIMES FORWARD EARNINGS. DON'T WE NEED AN UPSIDE SURPRISE TO JUSTIFY WHERE WE ARE AT? WE NEED UPSIDE SURPRISE TO JUSTIFY WHERE WE ARE TRADING RIGHT HERE, RIGHT NOW. KEVIN: I THINK WE ARE LOOKING AT OVERLOOKING ESTIMATES RIGHT NOW. MOST ANALYSTS EXPECT THE SECOND HALF OF THE YEAR TO BE BETTER BUT I THINK THE BATON IS GOING TO BE PASSED FROM U.S. TO INTERNATIONAL DEVELOPMENT MARKETS AS WE ARE SEEING. THAT IS WHERE THE GROWTH WILL TAKE PLACE FOR THE SECOND HALF OF THIS YEAR AND HEADING INTO 2007. DAVID: ONE IS SURPRISE BASED ON EXPECTATIONS. ANOTHER IS ACTUAL LEVELS OF EARNINGS. IF YOU'VE TAKEN IT SO FAR DOWN ON THE DOWNSIDE BUT YOU ARE STILL DOWN YEAR-OVER-YEAR IT WRECKS YOUR PRICE-TO-EARNINGS RATIO. KEVIN: I THINK THE REAL EARNINGS GROWTH WILL TAKE PLACE DURING THE SECOND HALF OF NEXT YEAR. SURPRISES IN THE FIRST QUARTER, MAYBE SECOND QUARTER BECAUSE OF LOWER ESTIMATES BUT THE FACT THAT THE FED HAS TAKEN ON MORE OF A DOVISH TONE AND ACTUALLY HELP MULTINATIONAL COMPANIES AS THE DOLLAR GETS WEAKER. VONNIE: DO WE NEED SOME KIND OF INFLATION HEDGE? JEFF: WE ARE NOT GOING TO GET MUCH ON THE INFLATION SIDE SO WHEN WE LOOK AT THESE EARNINGS WE'RE TALKING NOMINAL EARNINGS SO IT IS PULLED DOWN BY THE FACT THAT YOU DON'T HAVE A LOT OF PRICING POWER. I WANTED TO ASK A QUESTION. YOU CALLED IT A SECULAR BULL MARKET BUT ONE OF THE TELLTALE SIGNS OF GETTING TOWARDS THE END OF THE BULL MARKET IS NOT THE SURPRISES BUT THE GROWTH LEVELS. GROWTH IN PROFITS HAS BEEN TURNING DOWNWARD OR SOMETIME. THAT'S USUALLY A SIGN THAT WE ARE GETTING CLOSER TO THE END RATHER THAN THE BEGINNING. KEVIN: I THINK THE SECULAR BULL MARKET IS STARTING TO RUN OUT OF STEAM AND THIS COULD BE THE LAST YEAR. I THINK WE'RE GOING TO SEE NEW LEADERSHIP IN THE MARKET COMING OUT OF 2016. WE HAVE SEEN VALUE STOCKS OUTPERFORM GROSS STOCKS. MID-CAP OUTPERFORM LARGE-CAP AND SMALL-CAP AREA WE HAVE SEEN EMERGING MARKETS OUTPERFORM ALL DEVELOPED MARKETS U.S. AND INTERNATIONAL INCLUDING EUROPE. I THINK THIS IS THE YEAR THE MARKET LEADERSHIP CHANGES AND WE START NEW OPPORTUNITIES IN THE

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Bracing for an Earnings Slump, Is It All Bad News?

Hennion & Walsh CIO Kevin Mahn BlackRock Chief Investment Strategist for Fixed Income Jeffrey Rosenberg discuss corporate earnings. They speak on "Bloomberg ‹GO›." (Source: Bloomberg)

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