If you haven't done so already, the time is right to come clean and admit that growth - in most forms - is scarce right now. Whether it's the paltry 2% GDP we just scratched out, the weak jobs creation rut we've been stuck in month after month, or sales and profit growth faltering at a rate we haven't seen since the great recession.
The list of companies that have fallen short of expectation is long, and growing, but the reason for their retreat is simple; it's just plain tough out there. (See Related: Good Economic Data Meets Bad Earnings: Which One Is Wrong?)
As my co-host Jeff Macke and I discuss in the the attached video, Apple (AAPL) and Amazon (AMZN) may be the latest big names to miss, but they won't be the last. And unlike the past few years when strong guidance was enough to offset almost any disaster of trailing results, even that well has dried up too, as companies just can't see clearly enough to speak confidently about the future. (See Related: Ignore Apple's Quarter, Analyst Says the Stock's Still a 'Buy')
"There is not a bullish thesis here," Macke says, adding that "you're either going to sell everything or be patient buying the dips."
While I don't disagree with that, I think something more sinister could be underway, and would easily see the S&P 500's 4.5% slide doubling down to a 10% correction. At the same time, there's a debate underway that links disappointment on Wall Street versus analyst expectations with tight-fisted consumers unwilling to spend.
"Amazon is best merchant in the world. For them to miss on the top line, I don't care how you couch it, that's bad," Macke says, disregarding economic data and other indicators. "I don't care what the confidence levels are, people ain't buying and that's bad."
But is it? I mean, I get the whole Wall Street expectations game, but how bad can consumer confidence really be when Apple is able to sell 27 million iPhones in 90 days? Or when orders through Amazon saw its sales grow 27%?
It's definitely getting serious out there, with 3rd quarter results and 4th quarter forecasts clearly disappointing, but it is also important to look at things on an absolute basis, to tear apart the bond between market expectations and consumer reality. (See Related: Q3 Earnings Could Be First Negative Quarter in 3 Years)
"Listen to the companies themselves," Macke declares, "and Christmas is shaping up to be very dark."
Maybe it is, but at a certain point, a few percentage points cheaper, and with things like the election in the rear view mirror, the appetite for risk could flip in a hurry and a year-end rally would not be surprising.