NEW YORK (Reuters) – The growing ranks of stock market Eeyores now have another reason to stay glum: Next year’s profit picture is darkening fast.
Corporate earnings forecasts are eroding as the tailwind from the tax cut fades and as investors worry the U.S.-China trade dispute could upend global commerce more than it already has.
Even after the second correction of the year for the benchmark S&P 500 .SPX stock index, many investors wonder whether share prices adequately reflect risks of slower profit growth.
Emblematic of the recent turbulence, last week the S&P 500 slid 4.6 percent. The previous week it notched its biggest weekly gain in nearly seven years.
Speculative-grade loans, a rare bright spot in the fixed-income world for most of the year, have hit a rough patch, posing challenges for businesses that have relied on the market.
Investors have pulled $5.4 billion from loan-focused mutual funds since mid-October, including $4.1 billion in the past three weeks alone, according to data from Lipper.
That’s quite the turnaround: Investors had poured nearly $12 billion into loan-focused mutual funds in the year up to mid-October, even as they withdrew more than $22 billion from high-yield bond funds, according to Lipper.