Stock Market and Economic Commentary — week of February 8, 2016

by Crista Huff

 

On February 5^th, LinkedIn (LNKD) announced it would discontinue its Lead Accelerator marketing solutions platform. This came as quite a surprise to analysts, as the company had been heavily promoting Lead Accelerator as recently as September 2015. The news caused a dramatic change in LinkedIn’s future earnings outlook, and sent its stock down 44%, causing a weak day for tech stocks across the board.

The drop in tech stocks was unwarranted and irrational. Think about it: how does LinkedIn’s failed marketing program harm other companies? The answer: it doesn’t.

The LinkedIn affect on tech stocks is a microcosm of what’s happening in U.S. stock markets this year. People are uncertain, worried, fearful…of what? That interest rates might rise a tad, or fall a little? That we’ll have a recession? (Hint: we’ve been in a manufacturing recession for quite a while, but the overall economy is not even close to being in a recession.)

Will houses sell? Will cars sell? My question would be: why are people even worried about these things? Sales of cars and houses have been booming! That momentum does not grind to a halt overnight.

The only rational thing that’s happening in financial markets that should be causing concern is the falling price of oil, and its effects on energy companies’ profitability, stock dividends, and bond ratings. If you don’t own energy stocks, and you don’t work in the energy industry, you really have very little to worry about. (And as for owning energy stocks, I’ve been telling readers for several years to avoid the energy sector, due to poor earnings and/or poor stock charts.)

Bottom line: continue to own cream-of-the-crop stocks; undervalued companies with rising revenues and profits. U.S. stock markets always rebound. FedEx and Adobe and General Motors are not going to go out of business, simply because their share prices fell for a few months.

Please send questions and comments to research@goodfellowllc.com.

 

Crista Huff
President
Goodfellow LLC

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