...
...a sentence makes your eyes pop out like the cartoon characters of old? Today, in my morning update from the Wall Street Journal, this estimate was in with the other WSJ updates:
"Analysts predict second-quarter earnings will contract by about 3% from a year earlier, which would be the biggest earnings decline since the second quarter of 2016, according to FactSet. More than 80 S&P 500 companies warned that their second-quarter financial results will be weaker than initially expected."
The rule of thumb is that a stock 's price is directly correlated with earnings. So, if earnings are down 3%...stock prices should / could / would decline by 3%.
I thought..."hmmm...what will happen to stock prices IF 2nd Quarter 2019 earnings DO, in fact, come in weaker than the 3% now expected? Then, I asked; "What if some earnings are down more?"
The answer is...each company's stock price will fall in lockstep with earnings. AND, it will also respond, in like fashion, to the guidance for next year's expected earnings.
Add to that, one of my Top 5 Market Moguls, Gary Shilling's recent post: https://www.thinkadvisor.com/…/gary-shilling-the-recessio…/…
This definitely falls in line with my last two newsletters "9th Inning Investing."