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Illustration: Rebecca Zisser/Axios
After predicting eye-popping 11% first quarter profit growth for S&P 500 companies last year, analysts have massively scaled back expectations to the tune of roughly $16 billion in profits. They are now predicting the first year-over-year decline in 3 years, Axios' Courtenay Brown and Felix Salmon report.
Why it matters: Those lofty expectations had been set as recently as March and have come down drastically since, with some now predicting an "earnings recession" — negative earnings growth in the first two quarters of the year.
What happened: Estimations of how much and how long companies would benefit from tax reform were way too high, judging by the ratcheted up expectations after passage of the tax bill, which have since been revised down.
But disaster may not be imminent.
The big picture: There’s no clear correlation between an earnings recession and an economic recession. The last earnings recession started in the third quarter of 2015 and the economy continued to grow.
Be smart: If an earnings recession does happen it's expected to be short-lived. Analysts still expect fourth-quarter earnings to be 9% higher than they were a year previously.
Analysts' expectations for S&P 500 earnings growth this quarter started to drift downward from 6% at the end of last year — in the midst of the stock market sell-off — to the current estimate of -1.2%.
Nearly half of fund managers surveyed by Bank of America Merrill Lynch expect global GDP to fall in 2019 and 55% say they're bearish on both the world's growth and inflation outlook next year.
What it means: Emerging market stocks and bonds are typically thought of as more risky than developed market securities because emerging countries have less deep and less developed capital markets and are often more vulnerable to large swings in volatility.
Yes, but: BAML strategists say that despite the overall wall of worry — the U.S.-China trade war tops the list of biggest tail risks cited by investors for the ninth straight month — EM was the most crowded trade for the first time in survey history. That's even more impressive considering shorting EM was the third most crowded trade just last month.
But since the third quarter of 2018 EM has not only outperformed developed market peers like the U.S. and Europe, it has been less volatile.
What they're saying: Julian Howard, head of multi-asset solutions at GAM, said on CNBC in August that the market may have reached the peak of the anti-EM trade.
Fund managers at firms including Wells Fargo, USAA and BNY Mellon subsidiary Standish told me they were betting on EM in mid-2018, but the asset class failed to attract strong flows because of a torrid selloff early in the year.
U.S. wealth concentration, or income inequality, has returned to levels not seen since the 1920s, and it could actually be significantly worse than that time.
Driving the news: New research from Gabriel Zucman, an economics professor at the University of California, Berkeley, for NBER was unearthed recently by MarketWatch and finds that the top 1% owns about 40% of total household wealth. It reaches 40.8% when including the Forbes 400.
Further, the top 1% richest U.S. families own 40 times the average family's wealth.
Between the lines: Perhaps the most interesting part of Zucman's research may be his point that the top 1% of American households likely hold much more of the nation's and the world's wealth than anyone realizes.
"Because the wealthy have access to many opportunities for tax avoidance and tax evasion—and because the available evidence suggests that the tax planning industry has grown since the 1980s as it became globalized—traditional data sources are likely to under-estimate the level and rise of wealth concentration."
Zucman also notes that data shows the share of total wealth owned by the top 1% has increased by 9 points since 1989 and by 10 points when including the Forbes 400. In capitalized income estimates it has increased by 11 points.
Worth mentioning: Zucman is one of the economists behind Elizabeth Warren's wealth tax proposal.
The total U.S. public debt rose above $22 trillion, according to a Treasury Department report Tuesday. The financial burden is now expected to grow at a rate of $1 trillion a year.
Facts about $22 trillion dollars:
A stack of 22 trillion 1-dollar bills would go to the moon and back twice and once more to the moon and halfway back. It would weigh 220 tons.
If you stacked it in 100-dollar bills, it would be 880,000,000 inches or 13,889 miles high.
The average NFL franchise is worth $1.4 billion, thus the entire value of all NFL teams is around $45 billion. You could buy all of them and still have 99.8% of your money to purchase the MLB, NBA, NHL NASCAR, Premier League soccer, MLS, La Liga, UEFA Champions League, Formula 1...
What does just $1 trillion look like?
Here's an optical representation of what the debt looked like in 100-dollar bills at a quaint $11 trillion. Picture that times two.
A group called Demonocracy made this video depicting $20 trillion stacked around the Statue of Liberty.
You may laugh, but the Canseco Index, a blend of securities identified by former Major League Baseball star Jose Canseco's proprietary blockchain AI algorithm, has returned 107.9% year-to-date.*
*There is no such thing as the Canseco Index. I made that up.
History: Dr. George Franklin Grant was a professor, dentist and inventor. Grant worked for his hometown dentist, first running errands and later as an assistant. At age 19, Grant found work as a dental assistant and at 21 was accepted to Harvard Dental School, the first university-based dental program in the country. In 1870, Grant graduated with honors, the second African-American to earn a degree in dentistry.
He became a faculty member of Harvard University's school of medicine in 1871, becoming the university's first ever African-American professor. He was a founding member and later the president of the Harvard Odontological Society.
Franklin's best known invention was in the field of sport. In 1899 he filed a patent for a wooden spike with a flexible rubber peg for a golf ball — the world's first wooden golf tee. In 1991 the U.S. Golf Association recognized him for his contribution to the game.