After Good Friday’s not-so-good jobs report, we expect a continuation of the rocky road stocks are traveling this year. Like last year, a rough winter has sideswiped the economy. But new factors are in place – the fall in oil prices and the big rise in the dollar. Last year, when the economy shrank in Q1, corporate earnings still looked pretty good. Now, low oil prices are not giving the boost to spending that everyone expected, while hitting certain segments of the construction industry, many states’ oil producing industries, and other niches of the economy. The rising dollar has hurt exports across the board.
Stocks are not wildly expensive, but if we have a poor earnings season this quarter or next, that will be new and negative. So far in this bull market, earnings have come through well, quarter after quarter, year after year, pretty much since late 2009. Worse performance on that score will lead to a rough patch for stocks.
Buckle up, but keep an eye out for bargains, too.