by David Kranzler
Investment Research Dynamics
The stock market is becoming increasingly disconnected from underlying main street reality. Corporate profits have been declining since the third quarter of 2018. However, pre-tax corporate profits have been declining since the Q3 2014 (this data is available on the St. Louis Fed FRED website). Real corporate profits (adjusted for CPI and including inventory write-downs and capex) are the lowest since the financial crisis. Remarkably, rather than the usual “hockey stick” forecasts, Wall St analysts have revised lower their consensus earnings estimates for the Dow Jones Industrials. In fact, per the chart above, I think you can say that Wall Street’s forward EPS estimates have gone off a cliff.