Nov 25, 2018

The good news in the stock market decline

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Data: Factset; Chart: Lazaro Gamio/Axios

Axios told you on Tuesday that 2018 has been "brutal" for the stock market, and Bloomberg's Stephen Gandel followed up on Wednesday by saying that it's even worse than that. Above is a chart of one key valuation metric: the stock market's price-to-earnings ratio.

For the first year of the Trump presidency, valuations rose steadily. But in his second year, they've imploded and are now well below their level when he took office. The S&P 500 now trades at 17.5 times its earnings over the past 12 months. That's down 25% from the peak of 23.4 in January.

The big picture: This is not bad news. In many ways, it's exactly what you'd expect from a president who came in to office promising a large corporate tax cut.

  • Lower corporate taxes mean higher corporate earnings. Therefore, as the tax cut becomes increasingly likely, stock prices rise in anticipation of those higher earnings. That drives p/e ratios higher.
  • Once the tax cut arrives, earnings go up, in line with expectations. But the higher earnings mean a higher denominator for p/e ratios and therefore lower multiples.

The bottom line: When the market trades on a trailing p/e of 17.5, it no longer looks particularly frothy. Stock prices can certainly fall from these levels, especially if a tight labor market forces companies to pay their workers more and eats into profit margins. But most Americans would prefer higher wages to higher stock prices.

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Hurricanes, wildfires, the flu could strain COVID response

Illustration: Aïda Amer/Axios

Upcoming seasonal threats coinciding with the coronavirus pandemic could further strain America's already extended emergency management systems.

Why it matters: The coronavirus vaccine likely won't be available until at least mid-2021. But while the pandemic drags on, hurricane season begins in June, wildfires generally spike in the summer and fall, and flu season peaks between December and February.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 7 p.m. ET: 5,284,830 — Total deaths: 340,805 — Total recoveries — 2,102,302Map.
  2. U.S.: Total confirmed cases as of 6 p.m. ET: 1,618,948 — Total deaths: 96,983 — Total recoveries: 361,239 — Total tested: 13,762,261Map.
  3. Public health: FDA blocks sale of 29 coronavirus antibody tests in the U.S.Report finds "little evidence" coronavirus is under control in most states Muslim health care workers balance Ramadan fasting.
  4. States: Former Florida health dept. employee says official asked her to manipulate coronavirus dataDaily deaths in New York drop under 100 for the first time since March.
  5. Business: Small business outlook is slowly improving, but the pandemic hits minority-owned small businesses harder.
  6. World: Health officials report first death in Gaza stripCoronavirus testing is virtually nonexistent in some poor countries.
  7. 1 🏀 thing: NBA in early talks to restart season at Disney World.
  8. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Updated 28 mins ago - Politics & Policy

The coronavirus leaves those in food deserts even more vulnerable

Data: USDA; Cartogram: Sara Wise/Axios

The coronavirus pandemic has pushed many people to buy groceries and supplies in bulk, but nearly 23.5 million Americans who live far from supermarkets don’t have that option.

Why it matters: Low-income households in food deserts — more than a mile from a supermarket in a city or suburbs or more than 10 miles in rural areas — often struggle with having enough to eat, and the global pandemic has exacerbated that circumstance. Their access to fresh produce and meat continues to decrease, and they often turn instead to fast food or processed foods, according to the Agriculture Department.