Of course, I don’t know anything about what’s going to happen in the future, but I am just trying to make a more educated guess.
I completely agree with you that if the trade war happens, stock market will crash from here. The discussion is ONLY to assume that it won’t happen, as both China and US do not really want escalation in the trade war.
With that, I quote Jeremy Grantham in one of his recent writing:
The fundamentals are improving. The global economy is in sync for the first time in a dozen years and global profit margins are at a high; in the US, a corporate tax cut is on the way, which in today’s sticky, more monopolistic world, is unlikely to be quickly competed away as theory suggests, but very likely to further fatten the corporate share of the GDP pie.
There is just no sign of corporate future earnings to decline, excluding a big external shock such as trade war. Therefore, I am just presenting the argument that the decline may not be sustainable.
Yes, interest rate is rising, but the corporate debt to equity is at its lowest level in the past decade (the data itself, however, doesn’t prove anything, as 2007 corporate debut to equity level is also very low but we all know what happened in 2008).
What’s your side of argument of corporate earning decline except the trade war? Trump’s tweet on FANG stocks isn’t going to have a long-lasting effect.
