The Economy and Stocks: A Big Disconnect
HEADING into 2013, worried investors seem to have plenty of sound
reasons to consider paring back their exposure to domestic stocks.
With only two weeks remaining in 2012, Congress and the White House have
made little headway on a deal to avoid the spending cuts and tax
increases that are set to kick in at the end of December — a jolt that
economists say could send the economy into recession.
And even if this so-called fiscal cliff is averted, the economy is still
expected to grow at only a tepid annual rate of 2 percent. Corporate
earnings growth, meanwhile, has fallen from a rate of more than 17
percent in the third quarter of last year to just 2 percent today. And
revenue among companies in the Standard & Poor’s 500-stock index is
essentially flat, a sign that the global economy is slowing.