Are You Ready for the Financial Crisis of 2019?
Let&#x27;s be completely honest for just a second, the left-leaning&#x2F;never-trump news sources (i.e. nytimes, wapo, bloomberg, reuters, possibly the economist) are clamoring for a recession and right-leaning&#x2F;pro-trump news sources (i.e. foxnews, maybe wsj) do not see a recession in sight.<p>In the most recently reported quarter, Q318, the S&amp;P 500 saw Earnings growth +28% Year-over-year (IBES) and Sales Growth +8.5% Year-over-Year.  On a forward looking basis (the more important indicator), estimates for 2019 are currently at Sales Growth +5.6% Year-over-Year and Earnings growth of +8.5% Year-over-year (which is a more normalized trend, remember tax-cuts will become a head-wind in 2019).<p>IMO, the two biggest risks to the market, 1) China Trade Deal, 2) Slowing of Raising of Interest Rates.  If you see progress in either of these, I think you&#x27;ll see the market follow in suit. In terms of what&#x27;s currently priced into the market, I&#x27;d say that a more pessimistic scenario is currently being priced in and thus risk&#x2F;reward favors the upside.<p>IMO, the markets have a psychological component to them and the fear of an upcoming recession can cause a recession.  So, these articles are like adding fuel to a fire, &quot;Recessions have psychological and confidence aspects. For example, if companies expect economic activity to slow, they may reduce employment levels and save money rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession.&quot; [1]<p>Finally, I think the following excerpt, written by a former Morgan Stanley Equity Research Analyst, does a great job at explaining how one might approach analyzing the news:<p>&quot;Be skeptical, very skeptical, and even more skeptical.  Great analysts rarely accept anything at face value. ... Good Analysts always challenge what they&#x27;ve been told or given.  Over time, if a source of information proves accurate, let it into your circle or trust.  If we include the financial press, and everything distributed by companies, I&#x27;d say at least 75% of the information out there for consumption is misleading or omits an important piece of information relative to the topic.&quot; [2]<p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Recession" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Recession</a><p>[2] <a href="https:&#x2F;&#x2F;www.amazon.com&#x2F;Best-Practices-Equity-Research-Analysts&#x2F;dp&#x2F;0071736387" rel="nofollow">https:&#x2F;&#x2F;www.amazon.com&#x2F;Best-Practices-Equity-Research-Analys...</a>