U.S. companies are raising their outlook not just for oversees growth, but for domestic profits as well. The last time American executives were this optimistic, stocks climbed 39% over the next 3 1/2 years, data compiled by Bloomberg show. Shipping companies and computermakers, often seen as economic bellwethers, boosted forecasts the most.
Equities markets are already responding. The S&P 500 has gained 203 points since falling to a 10-month low on July 2 after companies topped analysts' estimates and investors speculated the Fed would act to boost growth. The benchmark rose 3.6% last week, the fifth-straight weekly gain.
Adding to improvements in the U.S., international growth and demand are rising, helping to lift profits at companies with a large share of sales outside the U.S. Bloomberg notes that investors are betting profits at S&P 500 companies that get most of their sales from outside the U.S. will beat the market. Since July 2, such stocks rose 10 percentage points more than American-focused stocks.
But for some, such as Clorox (CL) and Jones (JNY), rising raw-material prices are reducing profitability. Both lowered 2010 projections, and Bloomberg is forecasting average quarterly GDP growth of 2.5% through June 2011, which it notes is "half the average rate in the two years following contractions since 1949."