America’s stock market rally is on borrowed time

American corporate profits appear to be “running out of steam”, says Buttonwood in The Economist. They had recovered after the crisis and are close to a post-war record as a proportion of GDP.

But first-quarter S&P 500 earnings estimates were revised down by more than 4% between January and March, and profit warnings have been unusually plentiful.

Remove the effect of one-off items, such as a big write-downs the year before, and you will see that year-on-year profit growth is falling, according to Morgan Stanley Capital International. And a quick rebound looks unlikely.

While revenue growth has been gradual [...]

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