Jonathan Golub: Without Financials Corporate Earnings Have Gone Negative
The chief U.S. market strategist at UBS Securities LLC, Jonathan Golub, was interviewed on Bloomberg T.V.’s “Street Smart” and shared some interesting observations about the stock market.
Golub’s view is that the economy and market are running out of steam. He pointed out this was the first quarter of the recovery that showed negative growth, if you take out the financial sector. They are expecting negative growth in earnings in the next quarter, as well.
Golub said the market’s multiple is substantially higher than a year ago and without earnings growth it should stall out. He doesn’t expect the stock market to collapse, but has a hard time seeing how it can go higher without better earnings.
Golub added that, without financials, earnings fell two percent in the second quarter and are expected to fall two percent again in the third quarter.
When the economy only grows at 1 1/2 to 2 percent, earnings stop growing, Golub explained.
Golub also commented on the approaching fiscal cliff which knocked stocks down 17% last year. He doesn’t believe it will result in as severe a reaction by the market, but could be a negative toward the end of the year.
In this next video, Golub says stocks will stay cheap for five to ten years: