USA CORPORATE PROFITS GROWTH AND S&P 500
INDEX Quarterly Outlook
The proprietary Corporate Profits Growth Leading
Indicator (CPGLI) provides a quarterly outlook for the USA NIPA Profits.
The CPGLI indicator aims to provide advance signals of
the most lucrative periods of the stock market when profits grow strongly
and market follows the trend. Historically, these were the best times to be
overweight/net long and leveraged in equities.
More importantly, the CPGLI indicator aims to reduce
investment risk by identifying periods of weaker profits growth associated with below average and volatile stock market returns.
Historically, such times required reduction of exposure to equities and
See our presentations:
The National Income and Product
Account (NIPA) Corporate Profits (www.bea.gov) are closely aligned with the aggregate
earnings of the S&P 500 index companies (see a comparison
here), hence our NIPA Profits Outlook can be directly applied to forecast major
macro turning points in
the S&P 500 earnings.
Both, NIPA profits and S&P 500 earnings, strongly
correlate at the major macro turning points to the S&P 500 USA stock market index and other broad U.S. market
indices including Dow Jones, Russell 3000, Wilshire 5000, MSCI USA Index and
The CPGLI Outlook is also applicable to some degree, at the
macro turning points, to global indices that tend to be then synchronized with the USA such as
S&P Global 100 and MSCI All Countries World Index.
Links to our quarterly CPGLI Outlooks and Special
Situation Notes samples are on the left.
The 2007-2009 Global Financial Crisis was a true
test of the CPGLI outlook performance
CPGLI indicator issued strong SELL SIGNAL at the market TOP.
CPGLI indicator correctly picked the BOTTOM of the market issuing strong BUY
signal based on "Up strong" Outlook for V-shape recovery in corporate
May 2009 it
correctly signaled beginning of the V-shape economic recovery.
› Then, for the next 4+ years in quarterly outlooks,
the CPGLI indicator correctly predicted strongly growing profits and rising
with it broad stock market.
› The indicator, however, did not predict the Lehman
Brothers bank collapse in September 2008.
› The Special Situation Notes in
May 2009 correctly signaled a sharp turnaround in the financial stocks.
CPGLI Outlook predicted positive for stocks stabilization of the Eurozone.