US investors ignoring strong earnings

The S&P 500 fell 1.6 percent last week.

The US stock market has been falling despite strong earnings growth. According to a MarketWatch report, earnings for S&P 500 companies grew by 25.8 percent in the third quarter, the strongest performance since the third quarter of 2010.

However, from the start of earnings season to the close of trade last Friday, the S&P 500 has fallen 2.7 percent.

“Wall Street doesn’t care what you’ve done in the past. It’s all about what you’re going to do next quarter,” said Michael Arone, chief investment strategist at State Street Global Advisors.

“The market knows that earnings growth has peaked, and so earnings growth can’t be a reason any longer to ignore the macro picture,” said Tom Essaye, president of the Sevens Report.

Indeed, Bert Dohmen, president of Dohmen Capital Research, suggested in a Forbes article that central bank tightening and stock market overvaluation could push stocks down as much as 35-40 percent just to “normalize”.