Think stocks are bad now? Just wait until next year

As you probably already know, the stock market has been having problems of late.

Let me add another thing you can worry about.

According to Refinitiv Thomson Reuters, 80.7 percent of the 140 companies that have recently reported quarterly results have beaten the estimates of Wall Street analysts. And only 10.7 percent have seen earnings miss expectations.

That is great news considering that historically only 64 percent exceed the estimates and 21 percent miss.

So why is that bad news? Because even under these wonderful conditions, the stock market isn’t doing well. And that bodes poorly for the market when corporate earnings get back to their historical norms.

Next year, corporate profits probably won’t be as impressive because 2019 earnings will be compared with the 2018 numbers, which have been aided by the reduction in corporate taxes.

“The economy has been boosted by massive fiscal stimulus — plus an energy boom for the ages — steering it clear of recession risk,” says co-founder Lakshman Achuthan. “But it’s remarkable that it is already in a slowdown that not many see — certainly not the Fed.”

And a big drop in new home sales reported Wednesday is also making economists wary.

Fed Chairman Jerome Powell has continued raising interest rates because he believes the economy no longer needs the stimulus that low borrowing costs offer. That belief was driven home this week by a number of Fed governors who have publicly backed Powell’s stance.

But it is clear whom President Trump will blame if the economy slows measurably. He’s been criticizing Powell for a number of weeks, including a statement Tuesday complaining that President Obama got to work with zero interest rates and that the Fed isn’t giving Trump the same treatment. “I’m very unhappy,” the president said.

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