Without Earnings Growth, Expect Market Momentum to Fade

MAXfunds.com Co-Founder Jonas Max Ferris and Leeb Capital Management CEO Stephen Leeb weigh in on the state of the stock market in 2016.

Earnings need to improve before the market can go higher.

That’s the message from two market guests who appeared on FOX Business Network’s Cavuto: Coast to Coast on Thursday afternoon.

Stephen Leeb, CEO of Leeb Capital Management, said the short-term outlook for the market looks “okay,” especially with the March jobs report on tap for Friday morning.

“Unless you get some kind of outlying number like no gain in employment and no gain in wages, or wages down, I think the market’s probably going to continue up, but not in a great fashion,” he said.

Wall Street’s expectation for the non-farm payrolls report due out at 8:30 a.m. Friday is for the creation of 205,000 jobs in March. That’s lower than the pace of growth in February, which saw 242,000 jobs added to the U.S. economy, but still along the 200,000 trend seen for the last several months.

That said, Leeb continued by saying he believes the U.S. economy is still “a mess,” with corporate earnings not in line with the market’s upward trend.

“Profits are down, we really can’t get ahead of steam. Where’s the growth? Productivity is down on an annualized basis. This is no way to run a business or a country. But, right now, lots of money flowing in, I think we’ll be okay for the next few months,” he predicted.

To that point, Jonas Max Ferris, MAXfunds.com co-founder, agreed, saying the earnings momentum just doesn’t exist.

“They’re going down and the market’s going up. That’s not going to continue for very long,” he forecasted. “Either the earnings are going to start picking up in the next few months and catch up to the market, and then we can go to higher markets. Or the markets are going to fall back to where earnings are, which is down 5% to 10% excluding energy over the last year,” he said.

Ferris said because of that, he expects to see the market’s momentum – which has shown a significant comeback in the first quarter from the worst 10-day start in history – run out unless earnings growth comes back into view.