Goldilocks Has Abandoned Stock Markets
Recent data suggest the robust corporate earnings growth that has supported elevated equity prices may be coming to an end.
Investors are having a tough time these days.
Photographer: Spencer Platt/Getty Images North AmericaStrong U.S. economic growth has encouraged the Trump administration to escalate the trade war with China, putting increasing pressure on that nation’s economy and financial markets. At the same time, the Federal Reserve raised interest rates last month for the eighth time since December 2015, and a majority of policy makers even see the need to boost rates above the long-run neutral rate.
The prospect of higher tariffs has led several industrial companies including Sealed Air Corp, a maker of packages, and Fastenal Co., which sells factory-floor and construction site basics ranging from nuts and bolts to welding equipment, to forecast reduced profitability as their margins get squeezed. On the consumer front, retail sales rose by only 0.1 percent last month, below the 0.6 percent increase that had been forecast. Mortgage applications have fallen sharply in response to higher borrowing costs.