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Investors aren’t paying enough attention to this big risk lying in wait for stocks, says John Hancock strategist

Caution is a such a fleeting thing.

The S&P 500 SPX, -0.79% looks ready to get back up and fight Wednesday, a day after recession worries and fresh Italian political upheaval stopped a three-session winning streak. Investors are no doubt hoping for interest-rate cut reassurance from the Federal Reserve meeting minutes due later. On the speaking circuit, Minneapolis Fed’s Neil Kashkari pounded the table for a rate cut in September, while San Francisco Fed President Mary Daly said recession is not on the horizon.

That’s all ahead of Friday’s big show—Fed Chairman Jerome Powell’s appearance in Jackson Hole.

Caution is a such a fleeting thing.

The S&P 500 SPX, -0.79% looks ready to get back up and fight Wednesday, a day after recession worries and fresh Italian political upheaval stopped a three-session winning streak. Investors are no doubt hoping for interest-rate cut reassurance from the Federal Reserve meeting minutes due later. On the speaking circuit, Minneapolis Fed’s Neil Kashkari pounded the table for a rate cut in September, while San Francisco Fed President Mary Daly said recession is not on the horizon.

That’s all ahead of Friday’s big show—Fed Chairman Jerome Powell’s appearance in Jackson Hole.

“The biggest risk we see right now is the expectations of earnings growth that is being baked in by the Street for the S&P 500 for 2020, which is remarkably high,” Miskin told MarketWatch in an interview earlier this week.

How high? Wall Street analysts are expecting 10.5% earnings growth in 2020 for the S&P, he says, adding that we’d “need to see a significant change in the macro backdrop to achieve that type of earnings growth.”

And that’s as 2019 is only expected to produce earnings growth of 1%, after a pretty flat couple of quarters so far this year. Expectations for a ramp-up of earnings in the third quarter and blowout gains in the fourth quarter are also dubious, he says.

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GWO

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