05-10-2018, 12:39 PM
Bulls have been baffled as the three pillars of the stock rally going into 2018 (record earnings, global synchronous economic expansion, contained inflation) have been turned 180 degrees into peak earnings, a global economic slowdown, and a pick-up in inflation. Bulls turned apoplectic when earnings came out even better than expected. And guidance was better than expected. Even capital expenditures were better. Buybacks and dividends increased more than expected. But nobody seeed to care. Indeed, the bears have successfully seized on a potent "stew" of issues. 1. The Fed is raising rates. 2. Numerous geopolitical issues are creating distractions, including battles with China over trade, the Mueller probe and the uncertainty about what the U.S. will do with regard to the Iran nuclear deal. 3. It is turning into a seasonally weak trading period. "Sell in May" is the old saying. On top of that, the mid-term election cycle is a time when stocks traditionally drop.