By Shawn Langlois, MarketWatch
The doom-and-gloom crew has been drawing lines between the dot-com bubble and the current market climate for a while now. With stocks banging out record highs on a regular basis, those forecasting a collapse can’t catch a break.
But hey, it’s almost Halloween — maybe it’s their time to shine.
In that spirit, noted bear Albert Edwards, global strategist at Société Générale, earns our chart of the day with this graph showing how earnings have diverged from the S&P 500 to a degree not seen since, yes, 2000.
What does this mean? “Carnage awaits,” Edwards wrote in a note to clients over the weekend. He warned that surging tech stocks have disconnected from the reality of earnings at a problematic time.
“The unfolding profits recession will expose the ‘growth’ impostors and they will collapse, as they are on the wrong ‘growth’ [price-to-earnings] valuations with the wrong [earnings per share] projections,” he said. “Just like in 2001, investors will not wait to distinguish true ‘growth’ stocks from the impostors. Investors will slam the whole sector and work it out later.”
There is no “carnage” yet, as investors appear to be in the buying mood.
The Dow /zigman2/quotes/210598065/realtime DJIA +1.22% , S&P /zigman2/quotes/210599714/realtime SPX +0.91% and Nasdaq /zigman2/quotes/210598365/realtime COMP +1.00% are all higher. European stocks /zigman2/quotes/210599654/delayed XX:SXXP +1.16% also posted gains, while Asian stocks /zigman2/quotes/211618636/realtime XX:ADOW +0.42% were boosted by comments on Friday that the U.S. and China were close to reaching a “phase one” trade deal.
Shares of Tiffany /zigman2/quotes/209249105/composite TIF 0.00% are on fire, rallying by about 30% after Paris-based luxury goods company LVMH /zigman2/quotes/201350549/delayed FR:MC +1.87% said it’s in talks over a potential takeover. AT&T /zigman2/quotes/203165245/composite T +0.03% is up after the company it outlined steps it will take to placate activist investor Elliott Management. Spotify /zigman2/quotes/207488629/composite SPOT +1.03% is surging after the music service announced its CFO will retire and above-expectations user numbers.
President Donald Trump said on Sunday that a U.S. military raid in Syria led to the death of Abu Bakr al-Baghdadi, the shadowy leader of the Islamic State group. The E.U. granted a three-month extension to the U.K. to Brexit.
There’s a state of emergency in California after officials on Sunday ordered nearly 200,000 people to evacuate due to multiple wildfires. Power company PG&E /zigman2/quotes/202583141/composite PCG -1.33% cut electricity to millions of residents to prevent more areas from igniting.