Via Birch Gold Group,
If you look at the Dow year-to-date, you might think the market has rallied fairly well for the start of 2019. You might even think the uncertainty from 2018 was accounted for to some degree.
But not so fast. According to a recent report, Liz Ann-Sonders from Charles Schwab highlighted concerns about an imminent earnings recession.
Ann-Sonders said that an earnings recession – two straight quarters of year-over-year profit declines – is possible. It’s just not “something that the market is forecasting right now.”
She attributed the possibility of this recession to waning effects from last-year’s tax cuts. And over at MarketWatch, Mike Wilson from Morgan Stanley says their earnings recession call is playing out “faster than we thought.”
He also “downgraded S&P 500’s earnings-per-share growth target for the year to 1% from 4.3% and warned of a looming earnings recession.”
Ann-Sonders added more fuel to the fire by highlighting China as a second “wild-card” inside the recent rally:
Sonders and her team pointed out in a report released earlier this month that many big US companies, including paint maker PPG (PPG), chip giant Texas Instruments (TXN) and auto parts supplier Lear (LEA), have cited weakening demand in China on their recent earnings conference calls.
John Butters of FactSet Research provided more insight into what may be a historically “sputtering” market rally:
As of Feb. 8, with 66% of S&P 500 components having announced results, fourth-quarter earnings rose 13.3%. If this holds, it will be the first quarter that the index has not posted an increase of 20%…
So it appears the tax cuts that helped last year’s earnings aren’t going to help this year’s earnings. It also seems like Q4 earnings could be spinning tires in the mud.
Wilson finished the MarketWatch piece by expecting a “full-year decline of about 3.5% in S&P earnings.”
So even if Wall Street optimists are beating the “It’s a rally!” drum, the sound may not be as loud as they claim.
Take Off the Rose-Colored Glasses – And Uncertainty Still Looms
The Dow may have risen 2,000 points to start this year, but it lost over 5,000 points last year between October 3 and December 24.
And if you examine this year’s rise, the “slope” actually seems fairly flat, almost like the market is struggling to recover (see YTD chart below):
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http://www.zerohedge.com/news/2019-02-19/uncertainty-hiding-recent-market-rally?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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