As to tying this all into the overall stock market's outlook, an abrupt rise in interest rates as we have just witnessed -- Friday's rate rise was the largest one-day increase in nearly five years -- need not necessarily spell doom if profits are on a strong trajectory.
Unfortunately, this is not the case, as an unsettled and volatile fixed-income market is being accompanied by a less-than-stellar profit backdrop. Second-quarter 2013 earnings (excluding financials) are forecast to drop by about 1% while top-line sales increase by only 1.5%.
Second-half earnings are being projected at nearly 10% growth.
Similar to the ambitious housing projections for 2013-2014, the U.S. corporate profit outlook seems too optimistic as well.