U.S. Earnings Show No Sign Of Global Weakness (SPY, EEM, CAT)

Tim Seymour:  With about a third of the S&P 500 reporting second-quarter earnings so far, there are no real problems — and no indication that the world economy is slowing down.

Large-cap U.S. corporate profits are up 15% on average.

If there is a global catastrophe in the works, it had yet to work its way into these gigantic enterprises’ operations by the end of June.

And since bigger and more globally diversified U.S. companies are actually outperforming their more domestically focused counterparts, there does not seem to be any disaster brewing in emerging markets in particular.

When we weight the calculations according to market cap, the year-over-year growth in earnings clocks in at 39.2% at this point in the calendar.

Granted, Caterpillar (NYSE:CAT) missed estimates last week. Yet the company managed to boost its profits 44% on an adjusted basis during the recent quarter.

The only problem was that Wall Street was expecting 47% growth.

We watch Caterpillar closely around here because it sells roughly 30% of its heavy construction equipment into emerging markets, so it is a good bellwether into the health of these economies.

If China and other countries are still buying equipment, we know they are still building roads, factories and even entire cities.

The pace may be a little slower than the forecasts led people to anticipate, but it is far from the worst-case scenario.

Healthy earnings from the constituents of the S&P 500 — traded as the SPDR S&P 500 ETF (NYSE:SPY) — mean stocks in emerging markets and funds such as the iShares MSCI Emerging Markets Index ETF (NYSE:EEM) are alive and well.

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.

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