Is A Bear Market Imminent?
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Transcript of Is A Bear Market Imminent?
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The S&P 500 has gained 211% since this bull market started, but stocks haven’t risen much since the Fed stopped QE in October 2014.
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While the mainstream analysis remains quite bullish, the ongoing deterioration of MARKET INTERNALS & FUNDAMENTALS suggests something more pervasive.
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The S&P 500 (with its 108x P/E Facebook and 928x P/E Amazon) is practically back to record highs but underlying breadth remains a disaster…
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Without “FANG” and “NOSH”, the S&P 500 would be down year-to-date…
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Margin debt is at all-time highs!
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U.S. economic data unequivocally indicates a recessionary environment on par with 2001 and 2008.
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The import/export data is suggesting that the global weakness has now impacted the U.S. economy.
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The October figure was clearly not an exceptional number, and the jobs growth is clearly trending down off the January high.
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The strong US dollar, as compared to other currencies racing for the bottom, is having a negative effect on companies with international exposure.
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Rising Spreads Are A Very Bearish Signal For Stocks
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For profitability to surge, despite rather weak revenue growth, corporations have resorted to using debt to accelerate share buybacks.
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As you can see, REVENUE GROWTH is now NEGATIVE for the first time since 2008.
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We know from history that the dates when profits rolled over coincide very much with the slide into recession.
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CONCLUSION There is a probability that the markets could
rally through the end of the year. However, without a strengthening of the earnings and economic backdrop, such a rally will likely be a continuation of the current market topping process over the intermediate term.
While none of this means that a major market reversion is imminent, it does suggest taking on an accelerated risk profile in the current environment will likely not be greatly rewarding.