This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Beyond The 'fiscal Cliff,' Reasons For Optimism

Stocks in this article: BAC

Here are three things you should watch as you plot an investing strategy for the next four years.

THE BOTTOM LINE

The traditional thinking is that a Democratic president equals higher taxes for businesses. But financial analysts at UBS aren't so sure. In a report before the election, they predicted that the corporate tax rate would drop under Obama or Romney.

And anyway, says Carol Pepper, CEO of the wealth management firm Pepper International in New York, companies aren't going to stop growing just because they're faced with higher taxes.

"That," she says, "is cutting off your nose to spite your face."

Also, for more than three years, companies in the S&P 500 have improved earnings every quarter compared with the year before, according to market research company S&P Capital IQ.

Often, their growth has defied expectations. At the beginning of October, analysts were predicting that third-quarter corporate profits would fall nearly 2 percent compared with a year ago.

With about 90 percent of the companies in the S&P 500 turning in results, they're expected to be up more than 2 percent. And higher earnings generally send a company's stock higher.

That's no guarantee, of course. Revenue for the third quarter so far is up only about 0.6 percent, which means that companies' profit growth is driven not by selling more goods and services but by cutting costs, which can mean laying off workers or trimming salaries.

And compared with a year ago, the earnings and revenue growth is downright anemic. In the third quarter of 2011, earnings grew more than 17 percent over the previous year, according to S&P Capital IQ. Revenue was up more than 11 percent.

Still, if companies managed to grow profits during a slow economic recovery, they should have no trouble doing it if the economy really picks up.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs