This way, both the short-term perspective in today's daily comment as well as a longer-term view of the markets can be compared.
The figure below, published by Yardeni Research, shows how the S&P500 stocks earnings growth expectations for 2016 have fallen in past quarters.
https://www.google.com/search?source....0.bn0ch8oaT4A
Below are actual earnings growth rates published last week by Thomson Reuters.
It is also interesting to see how revenue growth has evolved by sector.
If we look only at the largest sectors, we can see that as of ten days ago, discretionaries and financials were showing a healthy growth in revenue (more loans to buy more cars?)
Health care revenues were the strongest at about 9%. But to me, health care spending is money that cannot be spent anywhere else.
Tech and Industrials showed rather negative revenue growth, while the energy sector was the most negative in terms of revenue growth.
As a general trend, we can see that S&P500 companies that have published Q4 reports have shown an aggregate Y/Y revenue drop of 3.6%.
Then, if we put in perspective the ratio of corporate credit to corporate equity value, we can see that buybacks worked well as long as that ratio was decreasing. Now that the ratio is increasing, buybacks using new debt will become increasingly difficult for banks to finance.
We can also see that distressed corporate debt is at levels last seen in 2009.
http://wolfstreet.com/2016/01/25/ban...n-they-pretend
Conclusions:
This type of long-term analysis is not very useful for short-term trading.
However, it is important to be conscious of the new negative earnings and revenue trend that markets are experiencing. We are in a contraction phase with the weight of bad debts mounting.
Barring the launch of a combined NIRP and QE4, I do not see the S&P500 going to a new high shortly.
The tendency will be to short strength until summer.
