Tags: Boockvar | crutch | earnings | stocks

Lindsey Group's Boockvar: Weak Earnings Could Weigh on Stocks

By    |   Tuesday, 21 April 2015 07:00 AM

The 56 S&P 500 companies that have reported first-quarter earnings as of April 17 have produced a blended drop in profits of 4.1 percent, according to FactSet. And if that trend continues, stocks could be in trouble, says Peter Boockvar, chief market analyst for the Lindsey Group.

Stocks have benefited from three "crutches" during the six-year bull market that has seen the S&P 500 index triple, he told CNBC.

One is quantitative easing, which the Federal Reserve ended last year. Another is low interest rates, which Boockvar expects the Fed to continue for quite some times. And third is corporate profits.

"Earnings now are looking more flattish year over year, so I think that's the main driver over the next three weeks," as more first-quarter profit reports are released, he explained. "That earnings crutch is beginning to change, and that's what investors need to be focused on."

As for the economy, "we're still stuck in this mediocrity of 2 to 2.5-percent GDP growth, and that's predominantly because productivity is so sluggish," Boockvar noted.

Meanwhile, you can add former Treasury Secretary Robert Rubin to the list of those concerned that bubbles may be building in financial markets.

"I don't have a personal view on whether we now have [market] excesses or not," he said at a conference in Washington last week, MarketWatch reported.

"But it certainly is a realistic possibility when you look at the U.S. stock market, which is near all-time highs, when you look at covenant-light and now non-covenant lending, [and] a vast increase in fixed-income [exchange-traded funds]."

While the Fed is focused on inflation and the economy, it should keep an eye on financial markets too, Rubin said.

"I believe that the Fed should take systemic risk into consideration in monetary-policy decisions, even though excesses and bubbles are impossible to identify with confidence except ex-post."

The central bank has kept its federal funds rate target at zero to 0.25 percent since December 2008. Many economists believe it will start raising rates in September.

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The 56 S&P 500 companies that have reported first-quarter earnings as of April 17 have produced a blended drop in profits of 4.1 percent, according to FactSet. And if that trend continues, stocks could be in trouble, says Peter Boockvar, chief market analyst for the Lindsey Group.
Boockvar, crutch, earnings, stocks
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2015-00-21
Tuesday, 21 April 2015 07:00 AM
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