Profit Confidential Reveals Four Main Reasons Why the Stock Market Will Crash in 2016
Profit Confidential points to four key reasons why the stock market will crash in 2016.
New York, NY, United States – March 22, 2016 /MarketersMedia/ —
Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, delivers four of the top reasons why the stock market is poised to crash in 2016.
“The bull-market just celebrated its seventh anniversary, making it the third longest bull-market in history. But the cheering on Wall Street was muted. That’s because the stock market has been very volatile since the beginning of the year—and is still in the red,” says economist and lead contributor Michael Lombardi. “In fact, four major indicators suggest the long-in-the-tooth bull-market is coming to an end. And the stock market could crash in 2016.”
In the fourth quarter of 2015, S&P 500 companies reported a decline of 3.3% in earnings and 3.9% decline in revenue. Corporate earnings have been falling for three consecutive quarters and revenue has been collapsing for four consecutive quarters. This represents the longest losing streak since the financial crisis of 2008 and 2009. In the first quarter of 2016, S&P 500 companies are expected to report a year-over-year decline in earnings of eight percent. (Source: “Earnings Insight,” factset.com data set, March 11, 2016; http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_3.11.16)
“Stock prices can’t rise when earnings are down, and investors are dumping stocks. In January of this year, investors sold $15.5 billion worth of long-term U.S. stock mutual funds,” Lombardi adds. “Last January, investors actually bought more than $6.6 billion worth of U.S. stock mutual funds. The stock market rises when money goes into it, not when money leaves it.” (Source: “Long Term Mutual Funds Net New Cash Flows,” ici.org data set, March 9, 2016; https://www.ici.org/info/flows_data_2016.xls)
Third, despite weak corporate earnings and fragile economy, the Federal Reserve is expected to raise its key lending rate which impacts interest rates because the U.S. unemployment rate continues to hold below five percent. Fed Chairwoman Janet Yellen’s bias to lower interest rates to support the stock market is not as clear as Greenspan or Bernanke’s conviction to support assets prices.
“Lastly, major global economies continue to struggle. This spells doom for the fifty percent of S&P 500 companies that have operations outside the U.S,” Lombardi explains. “For the fourth quarter of 2015, 11 of the 30 Dow Jones Industrial Average companies reported revenue figures from Europe. Nine of these companies reported year-over-year declines, and all of the 11 said it impacted their earnings per share.” (Source: “Dow 30 Companies Continued to Report Sales Declines in Europe in Q4,” Factset.com article, February 26, 2016; http://www.factset.com/insight/2016/02/earningsinsight_2.26.16#/h)
“Back in 2007, very few agreed with me when I said the stock market was poised to crash. There was as a major build up and then a few months later, stocks fell through the floor. A similar pattern emerged in 2015. In both years, major tops were in place on key stock indices,” Lombardi concludes. “I won’t be surprised to see 2016 be a repeat of 2008, when the stock market started to crash and most investors were taken by surprise.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com/customer-service.html
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