The Relentless Road to Recession Continued

Consider this a travelogue in pictures (graphs and charts really) that presents a rather striking and comprehensive image of a nation journeying into recession. Our decline is steeper now than it was even in my retelling of economic turns during the summer and early fall.

While the stock market has continued to rise (and I never said it wouldn’t rise this year until and unless recession begins and takes it down), earnings — upon which stock valuations used to be based in times long ago — have gone down quarter after quarter — both actual earnings and projected….

This, however, is not an article about what will happen to the stock market this year. I merely have to take the incongruity of its rise in a failing economy into consideration. Whether we are now in a melt-up toward a blow-off top in stocks or not, remains to be seen; but what doesn’t remain to be seen is whether or not the US economy (and global economy) is still moving relentlessly into recession at an even faster clip. Yes, it does remain to be seen whether or not the economy has already entered recession as I said it would by this time this year, but what doesn’t remain to be seen is whether or not all economic movements have continued to devolve toward recession.

Earnings would be much further down if not boosted by tax cuts, and earnings-per-share (down on average 2.3% YoY) would be down even more if not boosted by massive share buybacks because business revenue is generally down (lowest since the Obama years). Sales are generally down. Fourth-quarter revenue and earnings are projected to be lower still on a broader basis that includes services. These downshifts in revenue are likely to result in further cost-cutting in order to keep earnings from sinking as much, and those cost-cutting measures could include labor, thus slowering consumer capacity, which has been the only thing left holding the economy’s head above water.

What’s driving stocks up besides buybacks? Could it be the new QE where a quarter of a trillion dollars is working its way back up through markets? If so, the market may be getting a little ahead of itself:

It looks like the market has priced in a lot more QE4 than the Fed has promised. In fact, it looks like it has already priced in QE4ever. While I believe QE4ever is the course we are now on, the market might be a bit premature to price it all in at once. While the Fed’s QE may push stocks up more, we’ve seen years of proof that almost none of it trickles down to consumer capacity, so QE will not do much to boost the general economy as it sinks into recession due to consumers pulling back, which you’ll see below consumers now appear to be doing.

If the market goes up due to the Fed’s new QE4ever, it will be all the more out of synch with the underlying economy, which is likely to continue going down, in spite of the Fed’s QE, since Main Street and Joe and Joline Average are not QE participants.

This, however, is not an article about what will happen to the stock market this year. I merely have to take the incongruity of its rise in a failing economy into consideration. Whether we are now in a melt-up toward a blow-off top in stocks or not, remains to be seen; but what doesn’t remain to be seen is whether or not the US economy (and global economy) is still moving relentlessly into recession at an even faster clip. Yes, it does remain to be seen whether or not the economy has already entered recession as I said it would by this time this year, but what doesn’t remain to be seen is whether or not all economic movements have continued to devolve toward recession.

GDP ain’t what it used to be

Admittedly, I thought GDP growth would be close to flat in the third quarter and would go negative in the fourth, but the third-quarter turned out better than I thought it would at 1.9% an appears to be contrary to my recession prediction: