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Don't Worry "Everything Bad is Priced In"

The stock market has turned the corner. Everythig bad is priced in.

By now, investors priced in all the bad things they could price in: concerns about trade wars, geopolitics, rising rates and even fears that earnings growth peaked. But the economy is still growing and earnings are expected to grow by double digits this year and next,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

“We must keep in mind that the first-quarter earnings have been boosted a lot by a one-time tax windfall. But second-quarter earnings are expected to grow by another 20% even without the windfall but as the underlying corporate tax cuts start to kick in,” Cavanaugh added.

Not Priced In

  1. Insane valuations
  2. Mideast war
  3. China slowdown
  4. Eurozone slowdown
  5. Change in attitudes towards stocks

Of those, number 1 and number 5 are standouts.

Mike "Mish" Shedlock

Looking further into the future, things will be really bleak when Boomers start dying in large numbers. They are (and will be) the last moneyed American generation. Once they're gone, the system will consist almost entirely of bankster algos trading with each other all day.

All is well in financiatopia , look at the VIX

Well it the Fed is really serious about continuing to raise interest rates for whatever reason,

even as the yield curve continues to flatten, this will continue to push the dollar up with the potential to cause all kinds of problems imo, so I don’t think this is priced in the market.

Boomers will leave stuff behind. Property etc. Deflationary supply of stuff but that can be increasingly taxed too. I suspect change will come in that area, or, although deflationary, the wealth transfer can have a beneficial impact somehow.

... and she was saying the same things just as the market peaked in 2007. Stawks are cheap!

S&P 500 Index :

May 2015 - Feb 2016 ~~~> 14% correction

Jan 2018 - May 2018 ~~~> 11% correction

Two double digit corrections in the past three years. That is how “pricing in” takes place. Insane valuations? Not really, but check back after the huge overseas cash piles repatriate into stock buybacks That should be something to see.

Get in your car and try driving anywhere- traffic is horrendous; the economy is booming.

"second-quarter earnings are expected to grow by another 20%". If that kind of growth is priced in, what could go wrong?

That my favorite indicator as well. Here in CA the economy is off the charts! Next though you have to analyze the traffic. Lots of PUs with ladders and tools? Not so much. Semi's? Not really. Still a lot of one person one car, so no carpooling. I suppose a lot of people couldn't find housing and are taking on long commutes.

She didn't mention the balance on return between stocks and bonds shifting due to interest rates? Is this a blonde joke? 4. How do you keep a blonde in the shower all day?
Hand her a bottle of shampoo that says “lather, rinse, repeat

At this time in America stock buybacks fit in perfectly in a culture that is already addicted to drugs, porn, debt and corruption. Maybe I missed it, but I don’t think I saw stock options mentioned anywhere in this weekend’s article on buybacks in Barron's. Instead of trying to grow their companies through research and development new equipment and capital expenditures to gain market share, they simply take on massive amounts of new debt to get the earnings up to increase the value of their stock options. When a recession comes, they will have to service very costly debt, and to keep the stock and earnings from collapsing, they will start laying people off. So that being the case, it was very refreshing to hear Ruth Porat with Alphabet, it’s CFO , say in the conference call the company favors organic growth, strategic opportunities and capital expenditures to grow the company. I certainly hope she keeps her job! IMO stock options are extremely selfish as they really hurt middle class Americans looking for jobs.

I neglected to mention that stock options do make since when young companies are trying to hire first class talent since they don’t have the financial resources to compete with large companies in this situation.

Karyn Cavanaugh's comments are expected at major market turns and make for a good contrarian indicator.

Let us wait for 22nd May when the BEA announces non-financial corporate profits for the first quarter. This wipes away all the spurious gains.

I presume that if all the bad stuff is priced in, so is the good stuff. That's how markets work. Markets do not see the future, nor do the rest of us generally. Perhaps there are some people who can see further than the rest of us, but they are most likely specialists who will only see a small part, which can easily be overwhelmed by that which they don't see.

I presume that if all the bad stuff is priced in, so is the good stuff. That's how markets work. Markets do not see the future, nor do the rest of us generally. Perhaps there are some people who can see further than the rest of us, but they are most likely specialists who will only see a small part, which can easily be overwhelmed by that which they don't see.

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