If you haven’t heard about it elsewhere, you can read about here on my blog. Stocks are overpriced compared to historical metrics. One big reason for this has been an earnings recession that has continued to drag on. The S&P 500 index has seen year over year earnings decline for five straight quarters. These declines haven’t been massive like the ones during the recession but it is not good that prices were rising while earnings were declining. I do believe there are some glimmers of hope on the horizon but not everything is clear quite yet.
Early predictions showed a large spike in earnings for the last two quarters of 2016. Those hopes were soon tempered once Q3 numbers started to be released. Even though a rise in earnings is still expected, it won’t be as big as many hoped. Although if we do see a rise, a rise of any amount would be helpful right now. My main concern is that if earnings do rise, we are comparing those earnings to already depressed numbers. Anytime you have more than four quarters of declines, it becomes easier to see a bump and more depressing when you don’t see one.
So where are we right now? Well, the stock market has fallen and we are now at a four month low. The blame has been placed on the uncertainty of the election and the endless debate over an interest rate hike. It is a weird world we live in. The market goes up on concrete bad news but it then goes lower on hypothetical who knows what news. I’ve said this for months, this year was going to be a rocky road. There were too many factors colliding all at once for us to have a smooth ride of any kind this year.
By the time 2017 gets here we should have a much better picture of where we are at and where we are going next. At lot of the questions we have that are causing so much anxiety should be answered by the end of Q1 next year. Until then, it will be a bumpy ride. Hopefully earnings will start to finally rise and our economic ship can finally be steadied. I know that will go a long way to help calm the frayed nerves of the markets.