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Do the recent weak corporate earnings foretell the end of the longest bull market?
| 02/11/2019
Q4 2018 was one of the worst quarters on record for US stocks, which suffered the worst retracement ever in the history of the current bull market. However, the tide changed on Christmas Eve as US equities rallied higher and have sustained this rally through January 2019 and into February.
Despite the recent rally, market analysts such as Doug Kass have started sounding alarm bells warning investors that the recent rally might have reached its peak. Such analysts are looking at the mixed earnings data with many sectors underperforming analysts’ estimates as a warning sign that the bull market might have reached a climax.
According to Doug, investors are still swimming in the impressive gains they have witnessed throughout January, which has made them complacent. The data suggests that stocks might suffer a significant pullback in the near future, but investor sentiment is extremely bullish, which is why Doug believes that stocks are detached from the existing reality.
Some of the stock markets warning signs include:
- Slashed Q1 2019 profit estimates for the S&P 500 companies from -0.8% to -1.4%.
- A significant portion of S&P 500 companies have projected profits for Q1 2019 that are below expectations.
- Some of these companies include Delta Airlines, Netflix and Estee Lauder Cosmetics.
The negative trends being seen in the US stock market are worsening at a fast pace with conditions getting worse by the day. It is quite shocking that investors are not paying attention to this significant change in underlying trend.
The fact that by now it is evident that an economic slowdown is underway in most of Europe and China should inspire caution among US investors. However, the divergent US economic data has lulled investors into a false sense of security that might be their undoing in the near future.