Tags: Levy | corporate | profits | S&P

David Levy: Corporate Profits Will Fall Short Next Year

By    |   Monday, 30 September 2013 08:13 AM

A changing economic climate next year could lead to faltering corporate profits, says David Levy, chairman of Jerome Levy Forecasting Center.

"The economic climate could change considerably," he told the International Business Times (IBT). 

Profits will "probably fall short of current expectations" in the fourth quarter of this year and in 2014.

Editor’s Note:
Obama Donor Banned This Message (Shocking)

Shocks emanating from overseas, especially from emerging markets, pose the biggest danger, he stated. Many emerging market countries, unlike wealthier nations, cannot run up large deficits to stabilize the banking systems and manage their interest rates.

Also, rising rates may damage the housing market, slowing home sales and price increases.

The stock market could still continue performing well, at least for awhile, he noted.

“Nevertheless, profits and the economy might be firm enough for the stock market to rise into next year."

Sluggish economic growth will probably continue for at least another couple quarters, inflation will probably remain subdued and U.S. stocks will outperform those in European and emerging markets, Levy predicts.

When countries cut spending in austerity programs, the economy can only continue growing through the "pathological speculative activity and rapid balance sheet expansion," he told the IBT.

The prevailing view calls for stocks to continue rising this year. According to the consensus prediction of 10 stock experts surveyed by Barron's, the Standard & Poor's 500 will hit 1,700 by the end of the year. That would mean 19 percent gain for the year. Looking farther down the road, some experts predicted the S&P 500 would reach 2,000 or higher in 18 to 24 months.

Despite large gains, stocks are not expensive, experts say. The average firms on the S&P have an average forward price-earning ratio of 14, up from 13 at the end of last year but still below the historical average of 15.

However, three of the analysts surveyed predict the S&P 500 will drop to about 1,600 by the end of the year. Corporate earnings will fail to meet expectations, and investors may become frightened if the Federal Reserve scales back its bond-buying stimulus this year, prompting interest rates to rise and GDP growth to slow.

Plus, Congress may cause severe financial market turmoil by failing to agree on a budget and refusing to raise the debt ceiling, and weak growth in Europe and emerging markets and increasing geopolitical tensions in the Middle East pose threats, they say.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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A changing economic climate next year could lead to faltering corporate profits, says David Levy, chairman of Jerome Levy Forecasting Center.
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2013-13-30
Monday, 30 September 2013 08:13 AM
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