Investors dangerously ignoring bear market impact on earnings

Famed quick vendor Jim Chanos sees an alarming pattern available in the market.

“I have been on the Avenue [since] 1980 [and] not one bear market has ever traded above 9 occasions to 14 occasions the earlier peak earnings,” the Chanos & Co. founder advised CNBC’s “Quick Cash” on Monday.

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His newest warning comes within the midst of earnings season, two days earlier than the Federal Reserve choice on rates of interest and 4 days earlier than the important thing January employment report. In keeping with Chanos, the market won’t be able to beat rising charges and falling company profitability.

“Issues will not be low-cost,” stated Chanos, who acknowledges shares are nonetheless cheaper than 18 months in the past. “However individuals are pricing in a fairly good Goldilocks state of affairs.”

Up to now this 12 months, the S&P 500 is up nearly 5%, with media, expertise and airways main the positive aspects. On Tuesday, the index fell 1.3% to shut at 4,017.77.

Chanos notes the market is anticipating company earnings rising 12% this 12 months, 2% inflation and a Fed price reduce inside the subsequent six to seven months.

“That is just about nirvana in case you’re a bull,” he stated.

Chanos, who stated he would not attempt to time the market, doubts the bullish state of affairs will unfold.

“In case you suppose earnings are peaking now at $200, that is a good distance down,” Chanos stated. “That is 1,800 to 2,800 [on the S&P 500]. We’re not wherever close to that.”

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