We are constantly being told by the mainstream media that consumer confidence is high and that the economy is booming. Yet signs continue to emerge that all is not well under the surface. Companies have begun warning about profit losses, which could mean serious trouble for the market.
According to CNBC, many companies are lowering their expectations for the upcoming third-quarter earnings season. The warning should be heeded, as lower profit margins mean more layoffs and a less stable market. Citigroup strategist Tobias Levkovich said investors’ high expectations for profits could cause a hit to markets if earnings disappoint.
Earnings have been on a roll lately, with both the first and second quarters posting growth rates around 25 percent. Those growth rates, though, are expected to diminish considerably. The third quarter is projected to come in 19.3 percent while Q4 likely will slow to 17.3 percent, resulting in a full-year rate of a robust 20.4 percent, FactSet estimates.
In 2019, those numbers change: 7.1 percent and 7.3 percent for the first two quarters, respectively, and a full-year rate of 10.3 percent. -CNBC
Levkovich cast doubt on the expectations for 2019, telling clients, that “we believe current double-digit forecasts for profit growth seem excessive. Thus, caution may be appropriate.” And with the market basing much of its prolonged rally in 2019 on surging profits, this should serve as a warning that things may not be as easy in the near future. Levkovich also blamed a looming profit loss on tariffs and an ongoing trade war, citing sanction.
“Given ebullient investor sentiment, we do not think there is much room for companies to disappoint without taking a hefty toll on share prices,” Levkovich said. “Notably stronger dollar and higher interest rates plus some softness in emerging economies all intimate the potential for misses. We also wonder how CEOs and CFOs will respond to questions about the impact of trade sanctions.” With the trade war already impacting Americans wallets and disposable income, it makes sense that companies will see fewer profits.
The impact of the trade war hasn’t even been fully felt yet either, as inflation will come about after a rise in prices on goods and services. “Too few investors focus on the impact of cyclical businesses for [earnings per share] growth, in our opinion, and thus significant misconceptions abound,” Levkovich said. “We still worry that portfolio managers are anticipating too much from Corporate America and thus missing lofty expectations might be the catalyst for a pullback.
The “Great Bull” market that came after the financial crisis in 2008 is now dead according to a Bank of America Merrill Lynch analysis. This is due to slowing economic growth, rising interest rates, and too much debt – both government debt and personal debt.
I don’t care if Kavanaugh fucked a pig on the white house lawn. Tell these screeching women to STFU or we’ll give them something to cry about.
Modern US companies bitch and complain about profits while still awarding executives with bloated bonuses. Think AIG, your welcome fckers.
I call BS on this article. SOME companies may be losing money at this time but NOT all of them.
DR:
Ford are claiming that they’ve lost 1 billion dollars due to trump’s imposed tariffs. Other large manufacturers are, or will be, making similar claims. Profits will tumble…that is not BS!
This will impact on feeder industries reliant on business from the big guys…and so it spirals downwards. One doesn’t need a masters degree in economics to see where all this nonsense is leading to.
Or do you, who earns 44k pa and who is living in rented accommodation have specialist financial knowledge not privy to us mere mortals?
https://moneymaven.io/mishtalk/economics/foolish-nature-of-picking-winners-trump-s-tariffs-cost-ford-1-billion-tGOwqKFbTEyC25Nk3S8tIw/
The links below show a wider financial picture:
https://goldswitzerland.com/the-us-is-dead-broke/
https://www.motherjones.com/politics/2016/10/how-donald-trump-destroyed-his-empire-and-dumped-ruins-others-timeline/
Most are doing quite well or even setting records.
A liquidity crunch is all that’s needed to make this article’s assumptions correct. And that is what is coming as interest rates rise and money becomes more expensive.
All these corporate stock buy-backs were done when interest rates were low and money was cheap.
As the FED has raised rates the cost of money has gone up. Just this week the FED raised rates to 2.50-percent. That means commercial rates, to remain in step with FED rates, will need to go up to at least 3-percent. The banks will need to raise their rates to 5-percent. Not good for the average person.
Higher rates are not good for the government either. Higher rates means that the cost of interest on the debt goes up, too. The choice will quickly be either funding endless war and endless war-mongering, or paying the interest on the debt. Those are the priorities. Forget Medicare. Forget Social Security.
When the buy-backs and the IPOs stop that’s when you know the music has stopped playing.
Big box stores and chain franchises only launder govt subsidies, using the bare minimum of staff and matériel. The purpose of Chinese counterfeits is to fill a space on the shelf.
All of the boxes on that job app, which any sane, healthy, and respectable person would be afraid to check — ie, are you on the dole, from a mental institution, ex con, a literal bastard — represent a tax benefit to a company, really dealing in human wreckage.
Margins are apparently too thin to cover the cost of overhead, without national indebtedness and redistribution of the wealth of the provident.
Actually the ones most saying they make no profit are Hollywood production companies. They use outrageous accounting methods to show no profit when obviously they do. Look it up.
This famously came up with The Walking Dead as most of the principal cast as well as the original showrunner were contracted to get a portion of the profits. Then they claimed that no profit was made on paper and they were then sued. It’s still in litigation but when finally decided will cascade throughout Hollywood.
The infamous accounting of Hollywood was finally challenged by James Garner back in the 1970s. He was supposed to get a percentage on his hit TV Show “The Rockford Files.” However, when it came time for the studio to pay-up they said the show was not making any money. Garner took Hollywood to court. Won. And won big. Off course he was practically black-balled after that, given some really God-awful pieces of crap scripts. His leading ladies came working with women like Sally Fields. But after the court case he really didn’t need the money.