Monday Market Movement - Earnings Preview and Trump's Recession

Things are not that good.  

This weekend, respected business leader and leading GOP Presidential Candidate, Donald Trump, warned that the US is heading into a "very massive recession" and that "a combination of high unemployment and an overvalued stock market had set the stage for another economic slump.  I think we’re sitting on an economic bubble. A financial bubble," the billionaire businessman said in an interview with The Washington Post published on Saturday.  The Donald says unemployment is much higher than 5% and the Government is lying to us.  

"We’re at an (unemployment) number that’s probably into the twenties if you look at the real number,” he said, adding that the official jobless figure is "statistically devised to make politicians — and in particular presidents — look good."  Trump said “it’s a terrible time right now” to invest in the stock market."  

Don't forget, whether you agree with him or not, 50% of Republican voters do and that's about 70M of our fellow Americans who believe we are heading into a VERY MASSIVE Recession - that's going to put somewhat of a damper on their long-term outlook and likely to affect their spending patterns.  Even worse, Stan Druckenmiller of Soros' Quantum Fund, one of the most successful hedge funds of all time (now closed/private) agrees with my Friday post and says:

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"When I look at the current picture of expected tax revenues combined with benefits promised to future generations,this is the most unsustainable situation I have seen ever in my career."

Personally, I was trying to keep a bit more of a positive spin on things but Stan is right, we've got TROUBLE - right here in River City!  Fortunately, The Donald has a solution.  It's a secret, of course but, if we elect him, he promises to eliminate our entire $19Tn National Debt in less than 8 years.  Note that he didn't say "pay off" he said "eliminate" and yes folks, I do believe that Donald Trump can bankrupt America in 8 years or less.  After all Bush almost had us there in 8 years and that was coming off a very strong Clinton economy - if Trump can stop Clinton and initiate his policies, there's no telling how far we can fall.  

Certainly President Trump (get used to saying it) can't mean he will actually pay off the $19Tn debt in 8 years because $19/8 = $2.4Tn/year that needs to be paid off, starting on the day he takes office and, at the moment, our Government collects less than $3Tn in total taxes and is running a $600Bn deficit.  President Trump will lower taxes, not raise them so we need instant GDP growth of well over 100% to make that plan work - AND he'll have to cut the current account deficit at the same time - eliminating SS and Medicare completely would only get us halfway there.  

Does that seem insane to you?  If so, unlike many of our fellow Americans, you may be familiar with a concept called math, as well as a thing we Liberals like to refer to as Reality.  Einstein says you can, to some extent, create your own reality but, on the other hand, no one let Einstein cross a street by himself.  Trump wants us all to join him on his amazing journey to Fantasy Budget Land and, as noted by Dilbert's Scott Adams, he just might get his way...

Math is also a great problem for investors and economorons alike as only now are Q1 estimates getting in line with what we've been seeing (and warning you about) since last quarter.  That's why, despite this amazing Fed-induced recovery, we've stayed mainly in CASH!!! and are, in fact, moving to more CASH!!! on any sign that this triple-top move on the S&P (assuming we even make 2,100) is rejected yet again.  

As you can see from this Zacks chart, the downward revisions have been coming hard, fast and steady since they first went negative in December and now we are looking at -10% as the official expectation for Q1 Corporate Profitability.  

To some extent, we may say that's now baked in and that's a good thing but, to a larger extent - these are going to be some pretty shocking earnings numbers and there's bound to be some turmoil.

The worst hit, of course, is the energy sector, with -99.3% earnings growth projected on a prolonged slump in oil ($36.63) and natural gas ($2 this morning) prices.  That explains that but why aren't Transports doing well?  Why are other materials in the toilet?  Clearly we're simply not creating many goods on our economy and that's not the sign of real health, is it?  

9 out of 12 sectors on the Reuters chart are negative, that means 75% of the earnings that will be reported in April and May will be in decline from last year and, if those CEOs are Trump fans (and many are), then their outlook is not likely to be too rosy either.  That's why politics matters in market forecasting - with this cloud of gloom hanging over the country and more debates coming up - how can we expect a happy reaction to this "news" - even when we do know it's coming?

You can ignore politics and keep it out of your investing decision but you may as well choose to ignore earnings reports as they have at least an equal effect on the future of the company - possibly politics more so than any single earnings report can have as it shapes the future direction of our entire economy.  I'm simply saying that Trump is a serious candidate and he's saying we're heading for a MASSIVE Recession and there are tens of millions of citizens listening to him.

That's why, try as the Fed might, they are not going to "cheer up" the consumers.  Any Republican voter is convinced this country is on the wrong track and fears for their future, their jobs and their guns while any Democratic voter fears President Trump, almost as much as they fear President Cruz.  Either case has many Democrats reviewing the immigration policies of Canada.  

By the way, don't miss the Panama Papers - today's really fun scandal full of great hints on way to hide your money!