OECD Reduces Global Economic Growth Forecast (Reuters)
Investors wondering about the outlook for 2013 corporate earnings should pay attention to this morning’s report from the Organization for Economic Cooperation and Development (OECD) that reduced its global economic growth forecast for next year from 4.2% to 3.4%. The main impediment to growth is the mounting debt crisis in Europe. Investors also were warned to be ready for additional monetary easing policies in global economies, despite the Economic Union’s (EU’s) long-awaited agreement on a Greek bailout plan. Ultimately, the OECD said the EU is looking at two years of recession, while the U.S. economy will experience the same fate without an agreement on the looming fiscal cliff.
EU Finally Reaches Agreement on Greek Future (YahooFinance.com)
Leaders of the European Union (EU) and International Monetary Fund (IMF) finally agreed on long-term debt-reduction goals for Europe’s weakest economy. By accepting the terms of the agreement, which require a debt-to-GDP ratio of 124% by 2020 and 110% by 2022 — from estimated rates of 189% in 2013 and 193% in 2014 — Greece finally will receive the next injection of emergency funds, but not until December 13, 2012. Remaining bailout payments will be based upon actual strides made by the Greek economy to reduce debt — the first of which will be a pre-maturity bond buy-back program in December.
S&P 500 Earnings Growth Powered by a Handful of Companies (Slate)
Investors looking to U.S. large-caps for profitability in the coming quarters would be better off focusing on the handful of companies actually responsible for driving earnings this year, according to Morgan Stanley research analyst Adam Parker. Parker’s research shows that 90% of the S&P 500’s 2012’s earnings growth was powered by just 10 large-cap firms: Apple (AAPL), American International Group (AIG), Goldman Sachs (GS), Bank of America (BAC), Western Digital (WDC), General Electric (GE) Citigroup (C), International Business Machines, Corp. (IBM), J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC). Just four of those, AAPL, AIG, GS and BAC, accounted for more than half of that growth.