"It's not the economy... it's the dollar" - That would appear to be the message from the companies of the S&P 500 who have reported in Q3. As FactSet reports, 18 of the 23 companies reporting so far have cited "the strong dollar" as having a negative impact on earnings. Not record domestic inventories (liquidation beginning) [7], the plunge in world trade [8], not the economic collapse in take your pick of Brazil (depression) [9], China (credit endgame) [10], India (exports/imports crash) [11], and so on...
What is being missed here is that "The Dollar" is the symptom, not the cause of the problems. Capital is flowing for a reason to drive the USD stronger (or printed for a reason)... because the underlying economies are collapsing (yes and interest rate arb hopes).
So if ever there was a reason for The Fed to NOT raise rates, the pressure from Corporate CEOs (through their various lobbying or newsletter-writing alumni) must be immense... which explains the sudden change of mind... [13]
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It appears, for now, financial engineering (buybacks) has kept the dream alive relative to the soaring USD vs Asian/EM countries (US growth opps); and "hopeful" projections have kept Forward estimates of earnings alive - even as The USD soars against the American companies' most favored growth nations...
But at some point it's inevitable - unless there is a seismic shift in Fed Policy (QE4?) - that the USD's strength vs Asian/EM nations will crush earnings... and estimates will be unable to rise with even the biggest hockey-stick forecast.
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Remember. crises often start slowly... then erupt suddenly; and equity markets are always (without exception) the last to figure it out [16].
The credit cycle has well and truly rolled over...
Charts: FactSet and Bloomberg




