Toast

There appears to be a brewing pot of hope that come October’s earnings season companies are – in the round – going to deliver some earnings growth. Not negative growth, or flat. Up. Proper growth. So the, always in-it-to-win-it Wall Street analysts, seem to think. This would certainly be helpful in shouldering some of the unexpected YTD gains; a ballyhoo that has been driven by a small number of stocks and left the market multiple a squidgy 18.7x earnings for the all-inclusive buffet that is the S&P 500. That said, whilst earnings may sugar-dust the pie, there remain looming headwinds from the resumption of student loan repayments, high energy prices and mortgage rates that bulge the eyes. Any sustained move up from here then – say UBS – needs some collective oomph in those earnings numbers coming down the pipe. Amen to that. It is though, also the time of year when the Congressional air crackles with spittle and hot talk of government shut downs. Revved up by a summer off, Democrats and Republicans are – once again – set to take it down to the wire on the passing of a new budget. Box-office for those who like a political jelly-wrestle, but a sticky set-to given the rather inconvenient fact that the deficit for the fiscal year – according to the Congressional Budget Office – is projected to be $1.7 trillion. And it would have been a whole lot worse had the Supreme Court not reversed the benevolent President’s plan to forgive student loans. Like nudging $2 trillion. Holy. Moly. Within the August report lay one further salty fact. Albeit amongst many other salty facts. Interest payments on federal debt are up 30% from last year, and closing in on the entire national defence budget. Interest payments. Basically a third of the budget is used to pay the interest on all the money borrowed to fund prior years’ fiscal largesse. And this obscene deficit comes at a time when the economy is broadly doing OK, and when spending from the Inflation Reduction Act and other plans is set to accelerate in the years to come. It’s all a bit like the mother-in-law’s chocolate gateaux being served half frozen and everyone just carrying on: nodding, and smiling, eyes slightly glazed, nothing to see here. The sticky question remains: who is going to fund it? Overseas investors? Mom and Pop? Perhaps Warren Buffet. He is usually good for it when the gateaux hits the fan. Or will those printing presses need some WD40? Answers on a postcard.