The famous phrase that “Sir “The market is schizophrenic in the short term, but it regains its sanity in the long term” (Peter Lynch) it is always used in downward corrections and almost never in bullish exuberance. If we had a useful polygraph, we could control the market. to a truth test on the authenticity of the fact that the S&P 500 was able revalidate new historic highs in the same dates when an Israeli response attack on Iran is expectedwith a power vacuum in the White House three weeks before the election and no clear winning candidate. It is the latter, in reality, which should penalize the market the most.
Before one of the fathers of positivist criminology, the Italian doctor Cesare Lombroso, discovered us in The delinquent man that in the principle of evil and lies there is a genetic justification, the Chinese several centuries ago They had already designed a truth test to discover the criminals. 3,000 years ago, the honesty of the witness was judged by making him chew rice powder and then spit it out. If the rice powder was dry, it was proven that the witness had lied; If he had spit it out wet, he had been telling the truth. The ancient Bretons made the suspicious witness chew a slice of dry bread and cheese. If he could swallow it without problem, it was proof that he was telling the truth. And in the Israelite Judgment of God, when a witness was suspected of lying, a red-hot iron rod was placed on the tip of his tongue: if it burned, it was proof that he was lying. Underlying all three procedures was the same idea: when a witness lied, the fear of being discovered caused the activity of the salivary glands to decrease. With a dry mouth it was difficult for the rice powders to be expelled when wetthat the slice of dry bread and the cheese could be swallowed and that the tongue would not burn without the protection of saliva.
The litmus test with stock markets and valuations maxed out will be achieving or exceeding estimated profits. Analysts set the bar for passing the quarterly test with S&P 500 earnings per share growth of 8% from the same period last year, the highest in two years.
If we look at how the forecasts for the whole year have evolved, for this year the consensus of analysts expects that 237 dollars per share will be reached, which represents a figure 10% higher than that reported in 2023. The last earnings season ended with positive surprises, with margin improvements, but with investments slightly lower than expected. Weakness is expected to continue to come from cyclical sectors and strength in technology and semiconductors. If everything is true, the salivary glands of the bursa will be moist.
