Market Bullishness, Complacency May Lead to Missing Bigger Picture; Trump Administration Turning World Upside Down

With stocks remaining close to all-time highs - within 2-4% currently - there's a tendency in human nature to become complacent. It's when everything seems to be going well that something seemingly coming out of nowhere becomes a cause of grief and panic.

Today's post will examine some of the looming issues that may have profound effects on stock performance in the short, medium, and long term, but mostly, these projections will look at the next six to 18 months, or, until about the middle (June, July) or 2026.

First, however, a few companies that reported earnings Tuesday and Wednesday, prior to the open, should be examined.

Estee Lauder (EL) was rocked on Tuesday, down 16% after reporting its fiscal second quarter 2025 earnings. Adjusted earnings of 62 cents per share beat most estimates (which are adjusted lower all the time), but the bottom line was down 29% from earnings of 88 cents in the year-ago quarter. Gross revenue was also down year-on-year. This is a huge consumer outfit, and it's forecasting slower and lower for the next quarter and beyond.

This company is, and has been, in big trouble for the past three years, though one would hardly know it given the lack of reporting by the financial media. Shares of EL hit a high on December 31, 2021, of 370. Tuesday it closed at 69.47, representing an 80% loss. But, that's not a problem, because (sarcasm warning) bitcoin fixes that or "muh, AI." EL's price/earnings ratio is somewhere in the stratosphere. Nobody's buying it.

This is a recurring theme that Money Daily has been reporting on for months. Companies beat estimates, stock is rated a buy by analysts, Wall Street coos happily, but, underneath the hood, revenue and profit are down from the same period a year ago. Wall Street and the financial press are famous for whistling past graves, mostly those of unsuspecting retail investors, people with their life savings tied up in 401k, IRA, and other retirement-type vehicles.

The most prominent company that reported Tuesday was Alphabet (GOOG), parent of Google, Youtube, et. al. The company, from all outward appearances, had a solid quarter, beating top and bottom line. So, why is the stock down seven percent pre-market? Maybe AI can tell us? Probably not, though the company announced it was planning to spend $75 billion building out its AI architecture. Maybe that's a bit much.

Advanced Micro Devices (AMD) reported Tuesday post-close, and the stock got hit by as much as a nine percent decline. With Wednesday's opening bell less than an hour ahead, it's still down seven percent. AMD is a chip-maker, caught up in the whole AI trend, but they're a competitor to Nvidia, and they're losing the war.

Analysts have cut their price targets on the stock, down to around a consensus of 140. Ha, ha, the stock is going to open around 107 or 108 and nobody's buying. These analysts are so optimistic, like stocks never go down. Sure, buy the dip, dips--ts.

One company that usually reports rosy earnings is Chipolte Mexican Grill (CMG), and they did so again Tuesday night. So, why is the stock down five percent pre-market? Why does this question keep re-appearing company after company? A good question, and anybody with a good answer is probably preparing to short everything in sight, because, usually, when companies beat expectations but then sell off, the next thing you know is they're losing money the next quarter or, at least not making enough to keep investors happy.

And then you end up living on the street in a box. (just thought that should be thrown in)

Next up, Disney (DIS), which beat estimates and is only down less than one percent. Should anybody buy Disney stock? Seems a safe bet, maybe. At least they're not involved in spending billions on AI infrastructure. But, the stock is down from a high of 197 in March, 2021, to 113 as of Tuesday's close. Streaming? Mickey Mouse? Theme Parks? Maybe a pass on putting much money into this still-somewhat-WOKE company. Prospects are not without risk. Next!

Thought there might be a winner in Stanley Black & Decker (SWK). However, even though the company did well, shares are being pummeled prior to the open, down more than four percent.

Earnings: $194.9 million in Q4 vs. -$304.4 million in the same period last year. EPS: $1.28 in Q4 vs. -$2.03 in the same period last year. Excluding items, Stanley Black & Decker, Inc. reported adjusted earnings of $226.0 million or $1.49 per share for the period.

Those are solid numbers. Something is not adding up.

Last, Uber (UBER). Ooops, sorry. Here's a cross-section of headlines on the company's earnings: Strongest quarter ever, operating income well short of estimates, earnings, gross bookings outlook disappointing.

Well, shares are only down six percent heading toward the open.

Here's why all these stocks are falling and people are beginning to be a little less optimistic about future prospects, and this is only the short list:

• Stocks are generally overpriced and have been for quite a while.
• President Trump is upsetting the apple cart in Washington D.C. and around the world.
• Elon Musk is exposing the extreme levels of theft and corruption in the U.S. congress. Some House members and Senators may be looking at a choice of options ranging from jail time, to extensive investigations, to retirement. It's very serious and everybody knows it.

Wall Street doesn't like uncertainty, and President Trump is bringing buckets-full of it. He and his henchmen in the cabinet are going to gut the government, end the handouts, bribes, kickbacks, and generally destroy the "go along to get along" good buddy system in congress, which is where the evil has been for a long time. The last four years may have been the worst of it, but the corruption goes back at least fourty.

Considering that the U.S. government is $36 trillion in debt, most of it squandered lining the pockets of legislators and campaign contributors, it might occur to President Trump that the American people shouldn't be saddled with that kind of debt.

What could Trump do? Default on some, maybe, but more likely re-negotiate. Instead of paying 3 or 4 percent interest, he may want that cut to one or 1.25%, helping the American public by lowering the cost of borrowing. Additionally, once the President and his people are done tearing the heart out of official Washington, the unemployment rate is going to be around six or seven percent, and all those government bureaucrats can start life over again as roofers, construction workers, fast food employees or crop pickers. It's not going to be easy, or pretty, but, one thing it is is NECESSARY.

The rot and corruption needs to be completely wrung out of the system to enable a proper new beginning. There will be a deep recession, but it's likely to be short. And, inflation? Don't worry about that. Prices are about to come down hard on food, energy, and housing, because there isn't going to be much in the way of demand and there's plenty of supply in food and gas, and yes, even housing, if regulations are lifted and zoning laws gutted.

This is why stocks are beating street estimates but losing ground. The world is being turned upside down, and, while it's a good thing and necessary, it does not come without an inordinate share of bumps and bruises along the way.

Good luck.

At the Close, Tuesday, February 4, 2025:
Dow: 44,556.04, +134.13 (+0.30%)
NASDAQ: 19,654.02, +262.06 (+1.35%)
S&P 500: 6,037.88, +43.31 (+0.72%)
NYSE Composite: 19,964.61, +94.28 (+0.47%)