Jim Chanos, a well-known short seller, notices a worrying trend in the market.
The founder of Chanos & Co. said on CNBC’s “Fast Money” on Monday: “I’ve been on the Street [since] 1980 [and] not one bear market has ever gone over nine times to 14 times the preceding high earnings.”
In the heart of earnings season, two days before the Federal Reserve’s interest rate decision, and four days before the crucial January employment report, he issues his most recent warning. The market won’t be able to withstand higher rates and declining company profitability, claims Chanos.
While acknowledging that stocks are still less expensive than they were 18 months ago, Chanos remarked, “Things are not cheap.” However, prices are being set in a very pleasant Goldilocks scenario.
The S&P 500 has gained about 5% so far this year, with media, technology, and airlines topping the gains. The index decreased 1.3% on Tuesday, ending the day at 4,017.77.
According to Chanos, the market anticipates a 12% increase in corporate profits this year, 2% inflation, and a reduction in the federal funds rate within the next six to seven months.