"A decline in the cost of capital generates the anticipated bounce back. Given the extraordinary collapse in credit conditions in 2H07 all the way into early 2009, corporate cost of capital surged and drastically limited the ability for management teams to find investment projects that could generate high enough returns to justify authorizing new programs. But the tightening of credit spreads and easing in bank lending standards over the last 15 months are now allowing for capital programs to move forward with the traditional ninemonth lag manifesting itself once again."
"A new full-blown contraction in U.S. activity remains unlikely. However, 'oneoff' tax incentives now more clearly show larger positive effects on housing activity than we had expected, and the consequent payback to the downside will be larger. Even weather conditions will exacerbate this pattern."
"Second quarter 2010 earnings season is set to kick off in just over three weeks. Our model reveals that the best performance of our most positive surprises relative to that of our most negative surprises occurred from five weeks before the report date to the week of the report date. Therefore, we find it timely to present our latest results of our earnings surprise forecast model."
Citigroup Portfolio Strategist 20100624
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