Friday's GE bomb notwithstanding, the US stock market has bounced off its lows, and bulls are triumphantly proclaiming that we're off to the races again. (See, for example, "DOW 20,000 in 12 Months") Before you embrace this conclusion, however, consider the following:
In our experience, stocks don't normally go up on a sustained basis until earnings estimates stop coming down. (Investors love the "beating expectations" thing, and it's hard to beat expectations when expectations are still absurdly high).
If the stock market has already entered the next cyclical bull market, therefore, EPS estimates for the S&P 500 should be low enough that even recession-pummeled companies can sail over them.
Sure as heck doesn't seem that way to us.