Beware: US stocks are heading for a fall

There's been much talk from the bears this year about the sustainability of US earnings growth, but so far, says Philip Coggan in the FT, the fourth-quarter results season is "giving comfort to equity bulls".

According to the Bank of America, 35% of companies have beaten their targets by 5% or more, and only 8% have missed their targets by 5% or more. All in all, estimates so far suggest total annual growth of around 14.5%.

Clearly, the strength of the oil sector has pushed the average up, but even if you strip this out, growth still seems to be running at more than 9%, "a strong performance" given rising interest rates and material costs. The question now is just how long this growth can keep going.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Not much longer, says John Rogers in Forbes. After 14 rate rises in 18 months, many think that the tightening in the US is over, but there are inflationary pressures everywhere, something that suggests it probably isn't. And "higher rates are bad for stocks". They "penalise corporate earnings, crimp consumer spending and pump up fixed-income yields, making bonds and money market accounts more attractive than equities".

You'll be particularly worried about the US market if you are a believer in technical analysis, says David Stires in Fortune. Well-respected chartist Ralph Acampora of Knight Capital Group, Mark Arbeter, chief technical strategist at Standard & Poors, and Rick Bensignor, chief technical analyst at Morgan Stanley, all see patterns in their charts (related to everything from the length of the bull market so far to market volatility and the number of advancing versus declining stocks) that suggest stocks will take a major tumble this year.