Some bulls appear to be hoping the earnings news will save their bacon. But based on the figures I’m seeing, that’s just plain nuts!
Look, second-quarter profits at S&P 500 companies fell 1.6%. That was the worst performance since the end of the last recession.
The apologists will lay all the blame on energy, and it’s true you get a better reading … +5% … if you take oil and gas companies out of the mix. But even that ex-energy number was the slowest in the last few years.
What about the soon-to-be-reported Q3? Well, things look even worse there. Analysts currently forecast earnings will drop 4.5% … almost three times as much as they did in Q2. The ex-energy number is a dismal 0.5%, one-tenth the growth we saw just three months earlier.
|Corporate America is about to add up the third-quarter results – and the outlook isn’t good.|
In the wake of the recent rash of earnings warnings, analysts are also taking their knives to the Q4 outlook. That means things aren’t getting better as we head into year-end … they’re getting worse.
So sure, markets can bounce when they get oversold. We saw just such a rally attempt earlier today. But with growth slowing worldwide, and that slump washing up on our shores, I think we could be in for one heck of a rough Q3 earnings season.
Or in other words, I’ll repeat the advice I keep giving: Buckle up!
So what do you expect to hear from Corporate America? Good news? Bad news? Something in between? Do you think analysts will have to cut numbers even more aggressively, or is profit growth going to bottom out soon? What will that mean for stocks? Let me know your current thinking over at the Money and Markets website.
Yesterday’s market rout stemmed from ongoing turmoil in commodities and foreign stocks, and several of you shared your opinion on where things might go next in response.
Reader JRJ said: “Seems to me that the ultimate worry should be the value of all these abused fiat currencies. Central banks have been loading all their economic problems onto these 100% fiat, confidence-backed currencies. I wouldn’t be so quick to trade your real assets for cash (Dollars). I don’t think fiat currencies, backed by bankrupt governments, are the safe harbor many believe.”
Reader Chuck B. said: “Your remarks about Glencore and similar companies are rather scary. If very many of such companies actually fail, there seems no way that we could avoid a terrible crash. The things they produce and sell are the very basis for all else. Without them, recovery would seem problematical, at best.”
Reader Fred151 added: “Looks like this Bear is just getting started. The Nasdaq-100 was down approx 3% yesterday … quite a jolt if you were in tech. There could be a small bounce here for that index as there is a little shelf of support in this area going back to late 2014. But we still have no panic and the bigger charts say down, down, down so that should be the overriding trend.”
Finally, Reader Frebon said: “Central Banks out of bullets, recession looming, sovereign debt exceeding GDPs, artificial lower oil prices, massive stock buybacks, no business investment, no demand for commodities, only a matter of time until someone’s sovereign debt goes unpaid. Not a pretty picture.
“It just goes to show when economists rely on data and not common sense, this is the world they create. No wonder Ms. Yellen needed medical attention after two hours of blowing hot air. It seems the only fix is massive bankruptcies both corporate and sovereign. That would create a huge re-distribution of wealth and maybe this time, with the emphasis on creating demand not stock buybacks and mega mergers.”
Thanks for weighing in. It’s clear that many of you are worried about the same threats I am, and that you agree staying cautious is a smart move here. At some point, that will change … but I agree that point is not here yet.
Didn’t comment yet? Then don’t wait. Hop on over to the website and do so today.
The bulls here may think they have it bad. But at least they aren’t Qatar! The Middle Eastern nation is losing boatloads of money on its investments in several troubled companies, including about $12 billion on Volkswagen (VLKPY), Glencore PLC (GLNCY), and Agricultural Bank of China. Its sovereign wealth fund is one of the largest in the world, with $250 billion in assets.
The bond market is continuing to signal trouble in the world economy, with the so-called five-year breakeven rate sinking to a six-year low. The rate is the difference between yields on nominal 5-year Treasury Notes and 5-year Treasury Inflation Protected Securities; the lower the number, the more worried the market is about recession, deflation, and risk.
Several years after our original post-9/11 intervention, U.S. forces are still being called upon periodically to help battle the Taliban in Afghanistan. Warplanes launched airstrikes overnight to help Afghan soldiers beat back Taliban fighters in the northern city of Kunduz. The fighting there has claimed at least 25 lives so far.
Russian President Vladimir Putin and President Obama butted heads at the United Nations yesterday over Syria, Ukraine, and other global hot spots. Putin is challenging the U.S.’s Syria strategy in large part to defend his long-time confidant, leader Bashar al-Assad, and because he wants to maintain a Russian military base in the country.
What do you think about the losses hitting these large pools of capital worldwide; Will that lead to more withdrawals and more downside? Should we be worried about deflation rather than inflation, or Putin’s ongoing effort to outflank Obama? Let me know over at the website.
Until next time,