Companies have been cutting costs and streamlining operations, which has been good for earnings and ultimately, stock prices. But there are only so many costs a company can cut, which means gains stemming from corporate earnings may be coming to an end, says Richard Cookson, chief investment officer at Citi.
"The corporate sector continues to simply slash costs rather than focus on top-line growth," Cookson tells CNBC.
"If you carry on just cutting costs and cutting people, at some stage the growth will stop."
In the United States, many companies need consumers to spend again, but bad economic news — especially high unemployment rates — and uncertainty are keeping household purse strings tight and economic growth sluggish at best.
That's sending stock prices down.
"Investors are swinging back to caution," says Randy Bateman, chief investment officer and president of Huntington Asset Advisors, according to the Associated Press.
"There's some reality that's setting in that we're not out of the woods yet on this economy."
The Conference Board's Consumer Confidence Index plunged 15 points to 44.5 in August, well below the estimate of 53.3 from economists surveyed by FactSet, the AP adds.
The index is usually at 90 or above when the economy is strong.
So until the economy finally emerges from the doldrums, take corporate earnings with a pinch of salt, Cookson says.
"There's not a single market on God's earth where the consensus of analysts have predicted a fall in profits," Cookson says.
"From a long-term strategic perspective, looking at forwards earnings, all we know is that they are going to be wrong."
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