Markets stocks

The Earnings Recession Is Finally Here. Apparently, That Just Means Buy Stocks

We've been over this before

A smattering of weekend posts across mainstream financial media highlights the disconnect between profit growth and record-high stock prices. Or maybe "apparent" disconnect is better. We've been over this before. Now that multiples are elevated following a year during which virtually all gains across global equities were attributable to valuation expansion, the narrative pretty much has to be that stock prices are anticipating an inflection in bottom-line growth. It's either that, or you're clinging to the notion that multiples can expand still further - that investors will continue to pay more for a dollar of earnings, content to chase the market higher irrespective of the outlook for corporate profits. "I'll buy it up here, because somebody will surely buy it from me way up there". If Q4 earnings season (which kicks off in earnest next week) develops as expected, the earnings recession that folks have been talking about since the fourth quarter of 2018 will be a reality. As things stand right now, consensus expects to learn that profits fell 1.6% in Q4 2019, the second straight quarter of contraction. As you can see, the assumption going forward is that an inflection is
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5 comments on “The Earnings Recession Is Finally Here. Apparently, That Just Means Buy Stocks

  1. Michael says:

    Classic statement “I’ll buy it up here, because somebody will surely buy it from me way up there“.- negative rate bonds, stocks, houses … ‘the con-man’ economy?

  2. Anymouse says:

    Perverse, isn’t it? Tax cut causes buybacks and reduced float, 10,000 folks turn 65 daily and need income not found in bonds. Public/private pension plans are crushed and forced to equities. Excess profits make a stop at the C-suite and the rest goes to reckless M&A and IPOs, and corporate debt doubles what it was in 2007. Trillion dollar deficits in “flush” times, US debt to GDP rising from 65% to 105% in past ten years. Rolling recessions and consumer confidence at levels that preceded pas recessions. Nothin’ but Blue Skies…

  3. Anonymous says:

    Nasdaq 15k Dow 50k S&P 4k

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