A Stock Market Correction Is Imminent

Tuesday, August 29, 2017
By Paul Martin

Chad Shoop
August 28, 2017

This has been a frustrating earnings season for investors.

It’s not that the companies are doing poorly. They are actually topping estimates more than usual. It’s that investors aren’t rewarding them for beating estimates.

The other week I had a subscriber write in to me sharing this fact. Marco M. wrote:

“Hello, Chad. I just saw this on Yahoo Finance. Do you believe this would change behaviors on the great strategy you put together (which, by the way, I’m investing in)?”

Marco directed this question toward my Earnings Drift Alert service. My response was simply that our system does account for this very instance thanks to how it is designed.

But, in a broader sense, this anomaly, which hasn’t occurred since 2011, is a sign that a correction is looming.

Punished by Wall Street
During the second quarter this year, the underlying operations for companies were doing well.

According to FactSet, 73% of the companies that have reported so far have reported earnings per share above analyst estimates. This is above the five-year average of 68%. The earnings growth rate for the S&P 500 jumped to 10.2% from 6.4% at the end of June.

But the area of concern, as I mentioned, is that these stocks are not benefiting from their stellar earnings reports. Instead, Wall Street is actually punishing companies for strong earnings. Take a look:

The Rest…HERE

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