Earnings season(part1)

When I was doing my graduate work at University of Ottawa my major was business cycles.Later when I was in Cambridge I wrote articles for the Cambridge Reporter and the Kitchener Record.I got all my statistics from Wilfrid Laurier University to back up my story.My story was that the business cycle had changed from it's usual pattern and shape.Cycles from 1930 to 1970 had been traditionally four years in length and shaped like a "v".Production and income went down from 15% to 30% and came back 40 to 50%.The business cycle was necessary to overall economic growth;it brought with it a change in inventory and new equipment.
The "u" cycle
Governments started to adopt Keynsian economics.By increasing the money supply in various ways including buying government bonds to inflate the books of the commercial banks there was more money in the hands of bank customers.Loans would increase and consumers would spend more.Aggregate demand would increase.This increased production for consumers' increased demand and incomes grew.This actually lengthened the upwards part of the business cycle and stretched into a "u" shape.Previous business cycles had increases in income in the upward part of the cycle of 5,6, and7%.Now growth was reduced to 3,4 and sometimes 2.5%.No more growth rates of 6 and 7 % and no more recessions.Or at least recessions were dampened now.
Today's business cycle
The upwards part of this business cycle started in 2009 when the downwards part of the "v" or "u" was reached.Economic growth has been positive since 2009.But we are not getting growth of 5% or even 4% we are getting growth of 2 and 2.5%.This is because the economic growth has been dampened by government spending.This year is expected to have economic growth of 2 to 2.5 % and in coming years will likely reduce to 1% in the future.
The earnings season
The stock market is a leading indicator so that it's values lead the values of economic growth and income.The stock market was up 9% this year and might indicate that growth would be up by at least by 5% but in this dampened environment it will be only 2 to 2.5%.Earnings will on average only be up slightly for manufacturing and technology and the commodity-based sector will lag.There will be a few large increases as always but the investor must be careful as this is going to be only an average earnings season;we are not going to get 5or even 4%growth.