As you follow the economy over the next year, a key component to look for in earnings reports will be top-line, or revenue, growth. The reason this is important is that over the last several years, the market has been able to enjoy growth largely due to the Fed policy of Quantitative Easing. This policy has put cheap money into the system, and allowed corporations to take on huge amounts of cheap debt, while at the same time lowering the discount rate for those corporations and providing a somewhat artificial stimulus for stock price appreciation.
Although this has boosted the market, and allowed consumers to feel wealthier because of investment appreciation, time will tell whether this strategy will truly boost consumer spending, which will be reflected in revenue growth. If we do see year-to-year growth in the top-line, it will support the fact that the economy is able to support itself organically, rather than relying on the Fed for stimulus.
2 thoughts on “Organic Growth”
Don’t think the market is strong enough to be supported by organic growth yet. I’m thinking we will have a sharp downward trend when quantitative easing slows or stops and the markets hit reality. Because of this do you think we should have about 20-30% in cash so that we may take advantage of the down? (buy low, sell high)
Thanks for reading, Theresa, and thanks for the comment!