Whittle, whittle, whittle
GE drags down Dow Jones, as market continues slog
Today it was General Electric’s turn to bring down the Dow Jones average. GE fell 2% after Deutsche Bank analysts removed their Buy recommendation.
This is the way the world ends: not with a bang, but a whittle. Average top line growth and average earnings don’t necessarily add up to a rising overall market. When the equity market is priced to perfection, companies are punished more severely for underperforming than they are rewarded for outperforming. Earlier this week it was Yelp and SNAP. Yesterday it was the retailers, and today it’s GE and 3M.
In the absence of a game-changer, the US stock market should continue to trade weakly. The most important game-changer would be a tax cut, but as the Economist reports this morning, Treasury Secretary Steve Mnuchin says there is a big discrepancy between the White House and House GOP leader Paul Ryan on interest deductibility. Too many cooks are stirring the soup, and there is no clear path to a bill, let alone a law. For the time being we see no particular reason to own US stocks.