As we move into the peak of summer, I feel investors should spend time looking into earnings risk of the companies they are holding shares in. Stock markets in general have been moving based on the view that interest rates will go lower. This is like pushing on a piece of string as far as I'm concerned.
There are signs of economic weakness everywhere and this is beginning to show up in company profits. There is an inconsistency between weak economic growth, talk of interest rate cuts and monetary stimulus, and US stock markets trading at record highs. The bond market and the stock market are giving different messages about the future - both cannot be right.
