With over 83% of the S&P 500 having reported earnings for fourth quarter 2015, it is clear that the bullish reversal to 2014 earnings levels has failed. This post explores the earnings picture that continues to disappoint and some of the valuation issues that have developed.
The failure of earnings to reverse course to the upside after peaking in 3Q14 puts the equity markets at fundamental risk.
The rolling corrections starting in the summer of 2015 have set up a trading pattern that has some analogies to the patterns seen in late 2007 and early 2008.
- A decade ago, the notion of Peak Oil had become everyday reading – Peak Oil, or Hubbert’s theory, was the point in time when the maximum rate of extraction of petroleum is reached after which it is expected to enter terminal decline. Most of the older forecasts called for peak oil to occur somewhere in the 2000-2010 time-frame, forever creating a seller’s mar
Equity market conditions continued to be challenging with the S&P 500 falling (5.04%) in January after falling (1.78%) in December.
- Over the past seven years, there has been growing leadership by stocks whose companies were the most aggressive in reducing share counts by buying back their own stock.
- This became such a prevalent strategy that Standard and Poors started computing the effective tailwind to earnings per share from stock buybacks.
- According to Standard and Poors, in 4Q15, 77.6% of the
- There have been several questions regarding the eventual accuracy of the Atlanta Fed’s GDPNow forecast; it is important to note that GDPNow is computed based on the same data as is used for the official GDP calculation — it is simply recalculated in real-time as data is received.
- GDPNow right before the first estimate of 4Q15 GDP was 0.7%; the first estimate was 0.7
- 10-Year Treasury rates started a downtrend in 2000, accelerating in the 2008 Crisis; this downtrend was challenged in November-December 2015 as the Federal Reserve ended the ZIRP program, raising the Federal Funds Rate to a target of 0.25-0.50%.
- Contrary to several years’ expectations, this downtrend has not resolved to the upside and long duration rates have dropped