Business

Is the stock market setting up for a Crash?

For the first time since the 2009 bottom, Earnings Per Share (EPS) have diverged sharply to the downside from stocks.

There are a lot of reasons why investors buy stocks… but at the end of the day, they all boil down to earnings: the company is only a sound investment if it actually makes money.

The above chart shows us that earnings recently peaked and have diverged sharply from stock prices. Here’s a close up of the last three years:

• The Fed Is Meeting in April to Talk About June (BBG)
• Global stocks, oil prices climb as investors ready for Fed (Reuters)
• Apple Results to Show How Far iPhone Sales Have Fallen  (BBG)
• On Election Eve for five states, Trump rips Cruz and Kasich (Reuters)
• President Xi Jinping’s Most Dangerous Venture Yet: Remaking China’s Military (WSJ)
• Oil's Recovery Inches Higher as 'Fracklog' Awaits Price Trigger (BBG)
• Malaysia’s Reputation Takes Another Hit as State Fund Defaults  (BBG)

In early 2016, the biggest global macroeconomic risk factor was the accelerating capital outflows out of China over fears of currency devaluation (or simply because the local population knows better than anyone just how dire to domestic situation is and is rushing to park its assets offshore) and with good reason: after the PBOC burned through $1 trillion in reserves to offset capital flight starting in the summer of 2014, even the IMF chimed in with a concerned report suggesting China may have at most another half a trillion "buffer" left before it runs into illiquid assets which would pro

With the Fed decision just one day away, followed the very next day by the increasingly more irrational BOJ, stocks had no desire to make significant moves and overnight's boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.

As we continue to cover the pension crisis that is unfolding in the United States (recently here and here), it is important to remember that these problems are not unique to just the U.S.