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Illustration: Aïda Amer/Axios

For much of the year, equity bulls bought stocks on even the faintest hint of good news about companies or the economy, pushing U.S. indexes to new all-time highs despite a slowing economy and negligible earnings growth.

Why it matters: But with the S&P 500 approaching 20% gains for the year and no real signs of growth to be found, a spirit of pessimism and increased caution looks to be gripping the market.

What's happening: Stocks have been driven higher by 3 main catalysts: hope for a resolution of the U.S.-China trade war, expectations for easier central bank policy and a strong American consumer. It's still possible that all 3 come through to boost asset prices this year, but downside risks have come to overpower optimism in recent weeks.

  • The trade war is having a clear impact on not just manufacturing, but business and consumer confidence as well as capital expenditures and investment.
  • Data shows countries around the globe are seeing slowing GDP growth, with some going into reverse, including in Germany and the U.K., 2 of the world's 5 largest economies.
  • Extremely loose global central bank policy is failing to offset the negative impacts of slowing trade, growing uncertainty and weakening population demographics.

What they're saying:

  • "The disappointing data is only fanning long-standing fears of slowing global growth," Alec Young, managing director of global markets research at FTSE Russell, wrote in a note to clients.
  • "And with U.S.-China trade expected to produce little in the way of near-term breakthroughs, investors continue to favor countercyclical, defensive stocks with high dividend yields as weak data pushes interest rates ever lower," Young said.
  • “Fed rate cuts are not likely to fuel equities higher as they did in the 1990s,” UBS equity strategist Francois Trahan said in a note.
  • “The Fed-easing rallies of the 1990s were made possible by a strong inverse correlation between interest rates and [price-to-earnings ratios]. This relationship no longer exists today,” Trahan added.

The big picture: While most economists caution they are not expecting a global or U.S. recession in the next year, there is little on the horizon in the way of good news.

  • Third quarter corporate earnings are expected to be negative for the second quarter in a row and likely will slump again in the fourth, analysts say.

The bottom line: U.S. equity investors are now seeing a brand new stock market. In this market, traders sell companies with bad balance sheets and no profitability plans, and the market goes down when leading economic indicators point toward recession.

Go deeper

10,000 trees near giant sequoia groves to be removed after fires

A firefighter looks up at a giant sequoia tree after fire burned through the Sequoia National Forest near California Hot Springs, California, on Sept. 23. Photo: Patrick T. Fallon/AFP via Getty Images

"Upwards of" 10,000 trees near giant sequoia groves have been "weakened by drought, disease, age, and/or fire" and must be removed in the wake of California's wildfires, the Sequoia and Kings Canyon National Parks announced.

Why it matters: The damage to these trees, considered "national treasures," and work to remove them means a nearby key highway must remain closed to visitors as they have "the potential to strike people, cars, other structures, or create barriers to emergency response services," per a statement from the national parks.

Obama stumps for McAuliffe, urges Virginians not "to go back to the chaos"

Photo: Win McNamee/Getty Images

Former President Barack Obama framed a Nov. 2 gubernatorial race as a bellwether for the Democratic Party and the country, telling a crowd at a campaign event for Terry McAuliffe on Saturday that "I believe you, right here in Virginia, are going to show the rest of the country and the world that we're not going to indulge in our worst instincts."

Why it matters: With just over a week to go before Election Day in the Commonwealth, McAuliffe is bringing out the big guns. The 44th president appeared on the campus of Virginia Commonwealth University to urge supporters to get to the polls.

Bryan Walsh, author of Future
5 hours ago - Politics & Policy

Axios AM Deep Dive: America’s murder surge

Photo illustration: Sarah Grillo/Axios. Photo: Erik McGregor/LightRocket via Getty Images

Homicides rose at the fastest rate in at least six decades last year. This Axios AM Deep Dive, led by Future correspondent Bryan Walsh, looks at the state of gun crime.