Enjoy the Wall Street Party While it Lasts

Photo of author

By Jacob Maslow

stock market graphOne of the main reasons why Wall Street had experienced a nice pop early this year is due to the overall rosy earnings picture from last quarter. While there were some notable dark spots like Microsoft, American Express and Caterpillar, on the whole, last quarter’s earnings were very robust. This was all Wall Street needed to hit another record high. It seems the bulls are in control again and everything is going to look like rainbows and lollipops in Wall Street, right? Uhmm, not exactly.

Unfortunately, the party train towards 19,000 might stall abruptly in the near future. The culprit? A very weak first-quarter earnings forecast. If you’ve been paying attention to the earnings announcements this last quarter, a large number of companies were making negative projections for this quarter and beyond. In fact, some companies are putting negative projections for all of 2015. These negative projections and predictions of a slow global economy are all going to get translated into lower stock prices or at least a heavy downward pressure in the months ahead.

Would-be investors looking to jump into the market should pay attention to these factors. Moreover, keep in mind that oil company and petroleum industry earnings are down significantly. In fact, they are performing worse than expected. This will put even more downward pressure on the energy components of the Dow Jones Industrial Average. All told, the recent surge in the equities market may not be sustainable at least in the near term. This analysis is just based on what we know. Keep in mind that there is always a Black Swan situation lurking in the cards.

Images Courtesy of DepositPhotos