Profit Confidential’s Michael Lombardi has warned that despite January’s outstanding performance, stock markets should brace themselves for a sudden sell-off.
He explains that fourth quarter earnings reports show that only 46% of S&P 500 companies have surpassed market predictions; the lowest level since 2008.
“Many companies were citing increased input costs and a new general economic slowdown worldwide because of the Eurozone credit crisis as factors that affected their earnings reports,” Lombardi said.
Analysts will likely lower their S&P 500 expectations for the remainder of the year. Lombardi referred to the Association of American Railroads, who released a report showing that railcar growth slowed considerably in the second half of 2011 with only 1.1% growth last month.
“For 2012, the AAR sees a higher rail pricing environment along with higher fuel surcharges on the back of lower volume, which means that the U.S. economy is to remain relatively flat,” Lombardi explained.
“As I have been writing since 2009, we have simply been experiencing a sucker’s rally within the confines of a long-term bear market,” Lombardi said. “The divergence between earnings reports and stock prices cannot continue.”
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