After coming within points of an all-time high, stocks have begun to stumble, and volatility appears to be returning to the markets.
This has led some market pros to declare that an amazing four-year rally in stocks is over and that we're on the precipice of a new crash.
And there is certainly no shortage of logic to support that view.
Massive U.S. federal budget cuts are looming, political instability in Europe is returning, and currency values around the world are falling.
And by many measures, U.S. stocks look due for a comeuppance. Valuations are elevated, profit margins are at all-time highs, and there are signs of investor complacency everywhere.
Of course, not everyone thinks stocks are headed for a crash. In fact, some experts think we're at the beginning of a new long-term bull market and that investors should go "all-in." But we'll focus on those folks later.
For now...
Much of the recent frenzy of stock buying has been boosted by borrowed money. Margin levels are rising fast.
Source: Pragmatic Capitalism
Earnings growth expectations are tumbling. And earnings are the most important drivers of stocks.
Profit margins are already at record highs, and analysts expect them to go higher. Profit margins tend to be "mean-reverting," meaning that they don't stay at record levels (high or low) for long. So many analysts think a margin correction is coming.
See the rest of the story at Business Insider
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