Nothing lasts forever, and every economic expansion and bull market must eventually come to an end. There are signs that point to an economic and market cycle that’s mature and 4 warning signs appear that markets could fall:
1. Corporate earnings growth has peaked and is slowing. Earnings among S&P 500 companies soared 45% last year and this year, that growth should be closer to 9%.
2. The Federal Reserve is shifting from monetary easing, to monetary tightening. Less liquidity means slower growth, for both the economy and stock prices.
3. Economic growth is slowing. The Conference Board forecasts that U.S. GDP will grow by 3.5% this year, compared with estimated 2021 growth of 5.6%.
4. Bond yields are finally beginning to rise. Higher yields make bonds more attractive, so bonds will begin to compete with stocks.
Does the bull market we’ve experienced since the COVID-19 crash of March 2020 run out of steam?