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Profit Confidential (www.ProfitConfidential.com), an e-letter of Lombardi Publishing Corporation, a 29-year-old consumer publisher that has served over one million customers in 141 countries, is warning readers that the global economy is headed toward an economic slowdown that could derail U.S. stock prices.“The growth rates of major economies are anemic,” says Michael Lombardi, economist and lead contributor for Profit Confidential. “China is growing at its slowest pace in two decades, putting pressure on Australia’s economy, Japan has been going in and out of recession for years now, and the crisis in Greece has strained the eurozone’s economic growth even further. In addition, the U.S. economy experienced negative GDP growth in the first quarter of 2015.”
Lombardi explains that even those who have been previously optimistic about the global economy are becoming increasingly pessimistic. The International Monetary Fund (IMF) revised its global growth economic forecast for 2015 lower once again, expecting the global economy to grow just 3.3% this year compared to its original 3.5% growth forecast. But even that could be a little too optimistic; the IMF has now cut its expected 2015 economic growth rate three times since July 2014. (Source: “Slower Growth in Emerging Markets, a Gradual Pickup in Advanced Economies,” International Monetary Fund web site, July 2015; http://www.imf.org/external/pubs/ft/weo/2015/update/02/.)
Weak global growth will weigh heavily on U.S. stocks because American companies have significant operations in the global economy. As global growth suffers, these companies will face misery. In the second quarter of 2015, S&P 500 companies are expected to experience a 4.5% year-over-year decline in earnings—the first decline in earnings since the third quarter of 2012 and the biggest since the third quarter of 2009. (Source: “Earnings Insight,” FactSet.com, July 10, 2015; http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_7.10.15.)
“A large number of stocks listed on the key indices have significant operations outside of the U.S. In fact, after five years of stagnation, the percentage of sales from foreign countries has increased. In 2014, roughly 48% of sales from S&P 500-listed companies came from outside the United States; that’s up from 46.3% in 2013 and 46% for each of the previous four years,” Lombardi concludes. “If the global economy continues to struggle, U.S. companies will face headwinds and their profits and share price, will take a hit.” (Source: “S&P 500 Foreign Sales Report: Sales to Asia Rise, U.K. Moves Lower, Taxes Paid to U.S. Climbs Dramatically,” Yahoo! Finance, July 10, 2015; https://finance.yahoo.com/news/p-500-foreign-sales-report-133000304.html.)
For more information on Profit Confidential, visit www.ProfitConfidential.com.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.
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Website: http://www.profitconfidential.com/
Release ID: 87224
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