The odds of the S&P or Nasdaq’s earnings growing at greater than low single digits this year are not materially greater than zero. And I wouldn’t be at all surprised if they declined this year or next. There’s too much debt on the balance sheets, tech valuations are ridiculous (even if earnings don’t fall), we’re likely headed into a major slowdown if not outright recession, and I bet we see a large divergence between GAAP earnings and “reported operating earnings” (that is, “earnings before bad stuff”) either this year or next, much as we saw in 2000/2001. The only good news is that rates are low and unemployment is low (for now), but that ain’t enough to keep this leaky boat afloat. Right now the market is partying (almost) like it’s 1999. The only reason it isn’t going to fall like in 2000 is that valuations are lower… but they’re still well above what the fundamentals justify. An economic slowdown will have the pleasure of changing all that.
