Short View: Thank you Q2 2011 corporate results

Bears are confused…despite all the bad news around why Mr US Market is holding steady. US markets have recovered smartly from the lows seen in June 2011.

We are seeing a stalemate in the US debt ceiling issue though since 1940 there has been more than 100 changes in the debt ceiling limits…last time when it was done in early 2010 it was very smooth, most of us would not have even heard of it. Europe debt is getting out of control and there is a near consensus that Greece would default and its rating is just 2 notches above default…did I say default. The term default which was considered so sacred 1 month ago but now the markets are digesting it. There are so many news clips containing possibility of US default and probability of its credit ratings downgrade. Remember US has AAA ratings since 1914 and it has never defaulted on its loan ever. But despite these macro issues Mr Market is holding steady after a smart 5% rally.

Citing weak macro picture, the USD is declining against stronger currencies like JPY and CHF; and Gold is zooming to all time highs.

Bears are confused…finding reason for the steady market.

Since 2nd week of July we have seen a very good set of Q2 2011 corporate results emanating out of the US. Almost 75% of the companies have beaten their estimates. Very few prominent ones have disappointed which include the likes of Goldman Sachs, Caterpillar etc. This is almost 9th consecutive quarters of robust results. Many more are yet to come. We have host of energy companies which are yet to deliver their results which might led the market up for a while.

However things would start looking murkier again post the fading of result season and macro issues would again gain the ground to make bears happy. However there remains a distant possibility of US debt default but I would not undermine the probability of US credit downgrade citing political fight and non-consensus as reasons.