The stock market is almost always late in realizing the threat of a recession, but it is increasingly so hard to miss in Federal Reserve warnings. Not only there could be a recessionbut the Fed has no intention of stepping in to save investors at this time.
The problem is that I was bang on all year round: Investors still do not consider the major threat to profits, even though recessions almost always hit profits hard. Instead, much of the fall in stock prices has been due to rising rates that drag down valuations. Earnings were slightly lower this year, at least if you exclude energy companies that are boosting oil revenues, but Wall Street continues to forecast decent earnings growth next year.
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