Weighing the good news versus the bad news issuing from the economy is one of the most critical things investors do, but human biases get in the way. That’s a simple way of saying that people believe what they believe, even in the face of contradictions.
We have a massive jump in stock buybacks, courtesy of the tax law that was passed last December. Corporate earnings continue to come in stronger than expected. The labor market is healthy, consumer confidence is high and investors added a record amount of money to U.S. stock funds over the past week.
It’s hard to envision a slowdown in global economic growth on the horizon unless we get into a trade war with China. That could happen, but the current betting on Wall Street is that cooler heads will prevail. With this good news at investors’ backs, it’s understandable to be a bull, but investors also need to ask: Could peak earnings be coming sooner than expected?