— “Ahead of the Street” Column, by Mitchell Clark, B. Comm.
The stock market definitely needs more news for it to develop any new meaningful trend. As we know, it’s a trader’s market with a slight positive bias in general investor sentiment. I still think the best place to be for most risk-capital speculators is in U.S.-listed Chinese stocks and the mining business. In terms of sentiment in global capital markets, China is the gorilla in the room right now and its influence on currency, bond and stock markets is greater than its fundamentals.
I have always viewed all equity securities as risky assets. There are no safe equity investments and the connotation that a blue-chip investment is less risky than any other equity security just doesn’t hold water for me. I have to say, however, that there are some real standouts in the large-cap sector of the market right now and this is a good sign for the future.
PepsiCo, Inc. (NYSE/PEP) stands out as a real success, both operationally and with its performance on the stock market. The company just announced a major stock buyback, an increase in its dividend paid to stockholders, and even a new corporate strategy to cut sugary drinks from schools. In the large-cap technology field, Intel Corporation (NASDAQ/INTC) has been experiencing renewed demand from institutional investors due to its increased guidance and solid three-percent dividend.
I’m looking at a lot of these big, benchmark companies and I’m listening to what they’re saying. For companies like PepsiCo and Intel, management is saying that business is getting better. When companies raise their earnings guidance and their dividends paid to stockholders, then you have good, cursory indication that things are going well. In my mind, news from PepsiCo and Intel are positive indicators for the broader stock market. Large businesses like this really do have their fingers on the pulse of the economy. In fact, in this specific example, they are both consumer and technology businesses.
The big news this year is going to be strong corporate earnings. As for what the stock market does with this news, this remains to be seen.