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2001, 2015, 2008, 2020 And Right Now
It's not over yet, but with 70% of S&P 500 market cap having reported earnings, profit growth for corporate America was negative in Q4.
Assuming the same is true by the time the curtain closes on reporting season, it'll mark the first YoY decline in aggregate earnings since the onset of COVID plunged the US economy briefly into the first depression (with a "d") since the 1930s.
Q4 reports have had something for everyone, which is typical when the macro backdrop is defined by rampant ambigu
Grow, grow, and grow more! It’s the American story. But it’s not an infinite loop. We’re damned humans, a higher level of animal, but impulse-driven animals, nevertheless. The economic and global political and economic cycle in which we live at the moment only grows more hazardous as each month and year passes. I believe we’re coming to the end of the fairy tale of inexhaustible US growth. Political and economic dynamics are changing with global population. The world is shifting away from “globalization.”
Putin has stirred up a hot mess in the rules-based order of Europe, while China presents a threatening presence in the far east. Putin is acting on fondness for the past and reacting to the changing reality of the present. His wishes to hold fast to his power and attempt to subdue Ukraine may only hasten the demise of his own power and enable changes to the landscape of his own country. Like humanity itself, the world is messy.
I’ve sold my very limited Chinese holdings. People can disagree with me, but I have to imagine that investment in China is not a good move over the long term. But at the same time, the idea that the US economy can just grow, grow, and grow is unrealistic. Historically, the US has managed to capitalize on its experience in world wars. But aside from the British, our Civil War, Native Americans, and Pearl Harbor, we have never seen first-hand the impacts of foreign war on US soil. Needless to say, any war-making mess we might stir up with China would be very hazardous.
If we can re-engineer our supply chains, all the better. Though that’s not expected to be done expeditiously. I think we need to get our economic interests away from China as soon as possible. But the effects on US go-go economic growth in the long term don’t look so hot to me and are at best to be determined. I expect my small-caps will do fine later this year and next. However, I expect the table will look different after 2024.