Investors Feeling More Bearish About the Stock Market
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What headlines and economic risks are setting the scene for investor worries?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. A new Charles Schwab survey finds investors are feeling more bearish about stocks and the economy. We'll have more on this in a moment. First, here are some money headlines. The Wall Street Journal says the years-long expansion in U.S. corporate profits may be coming to an end sooner than investors expected. More than 30 companies in the S&P 500, including Netflix, Delta Airlines and Estee Lauder, have offered disappointing first quarter outlooks, citing deteriorating outlooks for the global economy as well as worries about trade tensions. As a result, analysts now expect a 1.4 percent drop in first quarter profits, according to FactSet.
That's way down from September when first quarter earnings were projected to rise around 7 percent. Economists say a fresh government shutdown would take a toll on U.S. economic growth as well as business and consumer sentiment. This as a deadline to reach a deal over border wall funding approaches next week. 58.9% of private sector economic forecasters surveyed recently by the Wall Street Journal said another shutdown would have somewhat of an impact on economic growth. while 16 percent said it would have a significant impact. Congress and the White House face a February 15th deadline to reach an agreement on spending issues, including funding for the president's long-promised wall along the border with Mexico.
Economists surveyed by the Journal also give Fed Chairman Jerome Powell a B-minus on his job performance. Below the B-plus they gave to former Fed Chiefs Ben Bernanke and Janet Yellen, but the same as the B-minus given to Alan Greenspan. Economists say Powell has had a problem in recent months with communication. Late last year, he signaled that the Fed would continue raising interest rates in 2019, but at the end of last month, Powell changed course, saying the case for higher rates had weakened and suggesting that the Fed was done raising rates for now.
How have recent corporate earnings and profit forecasts changed investor expectations?
Still ahead, J.R. Whalen talks with Schwab's Joe Vitry about increasingly bearish investor sentiment.
The stock market has seemed healthier in the first several weeks of 2019 than it did at the end of last year. But variables like the Chinese economy, instability in the eurozone and the very real possibility of another government shutdown here at home. make it difficult to measure economically which way the wind is blowing here in the U.S. That uncertainty shows up in Charles Schwab's investor sentiment report, and Schwab branch network leader Joe Vitry is on the line with us with some details. So, Joe, the market has trended upward this quarter, but the investors surveyed are feeling a lot more bearish than they did a year ago.
We really saw this show up in our survey that we conducted over the period of December 3rd through the 17th. Overall, we are seeing that retail clients, if you will, are feeling much more bearish than they were about a year ago. That number is 41% now, or 52% are feeling bearish now versus 41% this time last year. But they do still remain pretty confident in being able to reach their financial goals. That's sort of the overarching theme that we saw in the survey.
And investors told you that they are still, despite all that, they're bracing for a significant market downturn.
So many of the clients indicated that the leading concern in the market is around the U.S. political landscape. And, you know, clients are really divided on is the new makeup of Congress actually going to impact their investment strategy? And seeing overall concerns about the market may be overdue for a significant correction and, you know, maybe even be headed into an extended downturn. the majority of the clients actually believe that the next economic downturn, so when we think about the economy, is actually going to occur over the next couple of years. About 30% felt in the next year or so, and another 35 or so percent said in the next two to three years, we should see an economic downturn.
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