The stock market roared in February but March is coming in like a bear. Stocks suffered a second-straight decline Wednesday with the Dow falling 0.6% and the Nasdaq now down 0.8% from Monday's 'Nasdaq 5000' milestone.
Of course, two days does not a market make and reports of the bull market's death have been greatly exaggerated for nearly six years now. But David Nelson, chief strategist at Belpointe notes some "disturbing" trends that could at least put the market on a "sideways" (vs. upward) trajectory this year.
Most notably, Nelson notes that estimate revisions for S&P 500 stocks have fallen for seven-straight months, citing the analysis of Merrill Lynch strategist Savita Subramanian. Nelson details the trend here in his post on Yahoo Finance Contributors Network, but the short story is analysts have been cutting earnings estimates.
"It’s no secret that energy has been the biggest drag on earnings but some signs of deterioration have emerged within all sectors," he notes. "They're all deteriorating. The dollar has been incredibly strong so that's part of it but dollar is not the whole story" as earnings revisions are coming down for domestic companies as well. "It's a point of concern."
Other points of concern Nelson and I discuss in the accompanying video:
The aforementioned dollar strength, which is making it harder for U.S. multinationals to compete with foreign firms.
Valuations that may not be extreme but definitely aren't cheap.
Rising interest rates which put downward pressure on equity multiples, particularly for "bond substitutes" like utilities.
To be clear, Nelson stressed he's "not making a call 'this is the top'" but early warnings signs are starting to appear and one of these days the bull market is going to end.
Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at firstname.lastname@example.org.
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