Q3 2012 Is Shaping Up As The Ugliest Earnings Season And CEOs Now Should Be Freaking Out About Fiscal Cliff!
Every Investor And CEO Needs To See This Chart Before The Fiscal Cliff Is Hit
Drawing on a similar idea, back in April, John Hussman posted this chart, which compares corporate profitability to the inverse of government and household savings (with a lag). In other words, when government and household savings decline, the red line goes up. A few months later, the blue line (corporate profits) follow nicely.
Bottom line: The deficit is a major driver of corporate profits.
Investors need to take note that a sharp, sudden decrease in them could mean murder for the bottom line.
BofA Survey: Markets Taking Fiscal Cliff Too Lightly
Yet 72 percent of the Bank of America Merrill Lynch survey respondents believe investors aren’t doing enough to prepare for the cliff itself or the volatility that will brew as the end of the year approaches, according to CNBC.
“The fiscal cliff impacts the economy both by creating uncertainty and by imposing austerity,” Ethan Harris, Bank of America’s North American economist said, CNBC added.
“If we go over the cliff for an extended period of time, a recession is likely.”
Other experts agree that fears surrounding the fiscal cliff alone can damage recovery.
“There has not only been a fall in corporate confidence while consumer confidence has risen, but durable goods orders have reflected the weakness in CEO business confidence,” Andrew Garthwaite, global equity strategist at Credit Suisse, said in a note, CNBC added.
Stock Market Fragility Fast Approaching “Flash Crash” Levels