Trump’s Stock Market Has Been An Escalator Up But May Be An Elevator Down

Even though earnings growth was essentially zero in 2019, the markets hit record highs throughout the year as valuations increased combined with an outlook for earnings to grow in the high single-digits in 2020. Unfortunately, the combination of rich valuations and the diminished outlook for earnings growth due to the Wuhan coronavirus, has led to very step declines in stocks the past week. The Dow has fallen around 3,000 points or over 10% and entered correction territory.

After dropping over 900 points early on Thursday the market has recovered about half of it. Algorithms are playing and will continue to account for a large portion of the movements of the market as news items cross the wire and they react almost instantaneously. Numerous companies are pulling their financial guidance that they gave just about a month ago.

Mastercard disclosed that if current trends continue that its first quarter revenue growth will be lower by 2% to 3%. Starbucks has closed over 2,000 or half of its outlets in China and while United Airlines said it could still achieve its full year EPS guidance of $11 to $13 it was withdrawing it. Microsoft announced that it would not meet its guidance for its Personal Computing Business. It said, “Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated at the time of our Q2 earnings call.

Good - those gains came from the backs of those who did not benefit from it. WORKERS. I hope Wall Street crooks lose their shirts.

Buy the dip.

Oof

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