Investors dangerously ignoring bear market impact on earnings

Famed brief vendor Jim Chanos sees an alarming development within the market.

“I’ve been on the Street [since] 1980 [and] not one bear market has ever traded above nine times to 14 times the previous peak earnings,” the Chanos & Co. founder informed CNBC’s “Fast Money” on Monday.

His newest warning comes within the midst of earnings season, two days earlier than the Federal Reserve determination on rates of interest and 4 days earlier than the important thing January employment report. In accordance with Chanos, the market will be unable to beat rising charges and falling company profitability.

“Things are not cheap,” mentioned Chanos, who acknowledges shares are nonetheless cheaper than 18 months in the past. “But people are pricing in a pretty nice Goldilocks scenario.”

To this point this 12 months, the S&P 500 is up virtually 5%, with media, know-how and airways main the positive aspects. On Tuesday, the index fell 1.3% to shut at 4,017.77.

Chanos notes the market is anticipating company earnings rising 12% this 12 months, 2% inflation and a Fed charge reduce inside the subsequent six to seven months.

“That’s pretty much nirvana if you’re a bull,” he mentioned.

Chanos, who mentioned he would not attempt to time the market, doubts the bullish situation will unfold.

“If you think earnings are peaking now at $200, that’s a long way down,” Chanos mentioned. “That’s 1,800 to 2,800 [on the S&P 500]. We are not anywhere near that.”


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