CORPORATE FUNDAMENTALS DISCONNECTED WITH 'BAKED-IN" FUTURE REALITY
MATASII RESEARCH ANALYSIS & SYNTHESIS:
The problem with current Corporate Fundamentals is:
1- RISING LABOR COSTS & LOST PRICING POWER
- A big part of the past decade’s spike in corporate profits came at the expense of workers, who saw real wages stagnate while the cost of living rose. Now, with labor markets tightening and minimum wages rising, workers are getting a bigger slice of their employers’ revenues.
- That means shrinking corporate margins and, other things being equal, slower to negative earnings growth.
2-SUGAR HIGH OF TAX CUTS IS OVER FOR ALREADY ELEVATED PROFIT MARGINS
- Corporate profit margins stopped widening in 2015 as wage inflation began to bite.
- Then they spiked in 2018 when the Trump corporate tax cuts provided a one-time windfall. But that windfall is over and future comparisons will be with last year’s unbeatable earnings.
- Public companies are going to report lower year-over-year profits going forward.
3-STOCKS CURRENTLY OVER-VALUED TO THE EXTREME
- Stocks are now a lot more expensive both nominally and compared to earnings than they were in 2015, which means the air pockets under them are much bigger.
- They’re priced for perfection, and falling earnings per share is the definition of imperfect for the stock market.
[SITE INDEX -- MATA: FUNDAMENTALS]
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