Daily Agenda: Investors Adjust Expectations This Earnings Season

Ruble tumbles further against major currencies; Sweden cuts repo rate to zero; Facebook reporting earnings after market close.


Linus Hook

After weeks of volatility, equity markets have had a bullish rebound over the past several days. The big question facing investors in the stock markets today is not whether equities have hit bottom but what the coming quarters hold in store for profits. Despite an upbeat quarterly earnings season so far, the lack of sell-side upgrades has been palpable: More than 60 percent of 2015 estimate changes to date have been reductions.

Key U.S. macro data is on deck. U.S. data on the schedule for release today includes September durable goods, October Conference Board consumer confidence levels and Case-Shiller home price levels for August. Forecasts show the price of homes dropping in late summer despite tightening supply and historically low mortgage rates. This would be the third consecutive decline following a sharp contraction in July.

Sweden’s interest rate hits zero. In an attempt to nudge inflation higher, Sweden’s central bank cut its benchmark repo rate to zero percent. The Executive Board of the Riksbank reiterated in its announcement that despite slack demand the Swedish economy is strong and that activity continues to improve.

Eyes are on Facebook as earnings season continues. With 208 of the companies on the S&P 500 having reported quarterly earnings before the start of the week, the S&P 500 is on track to register an aggregate gain of nearly 4 percent in top-line revenue for the quarter. Media and tech sector investors will focus on the announcement by Facebook after U.S. equity markets close this afternoon.

Ruble plunges further. The Russian ruble reached record lows against the euro today. The Russian Finance Ministry announced yesterday that it would seek to cut as much as 10 percent of the budget presented in the Duma to compensate for lower oil revenues.

Portfolio Perspective: Investing in India’s Aspirations to be a Global Military SuperpowerPeter Kohli, DMS Funds

India has its sights on becoming a global military superpower on par with the U.S. and China to counter the arms buildup in the People’s Republic and neighbor Pakistan. That calls for massive growth in defense-related research and development. India’s defense spending is expected to grow from $117 billion in 2012 to $654 billion in 2045, According to a report from the U.K. Ministry of Defense titled “Global Strategic Trends — Out to 2045.”

For the time being, however, India imports nearly all of its military supplies — it produces no weapons or equipment other than a few ballistic missiles — and over the past three years has been the world’s largest military buyer. Much of India’s munitions date from the Soviet era.

In a move to attract more foreign direct investment and industry expertise to the defense industry, India’s cabinet in August raised the maximum foreign-ownership level in military and defense companies to 49 percent, up from a previous limit of 26 percent.

Peter Kohli is the CEO of Leesport, Pennsylvania–based DMS Funds, a mutual fund firm that specializes in emerging and frontier markets.