Think this bull market will just go on and on forever? Pour yourself a cuppa Joe and read my column today. This is your wake-up call.

When stocks are overpriced as they are now, it takes little disappointment to send them lower. One looming disappointment right now is weak earnings growth. Below, I’ll show you the right defensive moves to make under current conditions.

First, let’s take a quick look at fourth-quarter 2019 earnings growth rates (year-over-year) posted so far by the S&P 500, as of January 29.

The following chart breaks down the performance of all 11 S&P 500 sectors, on a blended basis. Blended combines actual results for companies that have reported and estimated results for companies that have yet to report.

As you can see, utilities and financials lead the pack, with energy and materials as the worst laggards.

And yet, despite these lackluster earnings results, overall stock market valuations are historically high. As of yesterday’s market close, the forward 12-month price-to-earnings (P/E) ratio for the S&P 500 stood at 19.2. This forward P/E ratio surpasses the four most recent historical averages for the S&P 500: 5-year (16.7), 10-year (14.9), 15-year (14.5), and 20-year (15.5).

Looney Tunes on Wall Street…

The stock market continues to defy gravity. I’m reminded of the Warner Brothers cartoons that I watched as a kid on television every Saturday morning. I particularly loved Wile E. Coyote. In frantic pursuit of the Road Runner, the hapless predator would run straight off a cliff and continue to pump his legs in midair…until he glanced around, gulped, and plummeted into the canyon. Perhaps the stock market faces a Wile E. Coyote moment.

Signs of slowing economic growth could jolt the markets back to reality. The government revealed Wednesday that the U.S. goods trade deficit increased sharply in December, despite U.S. tariffs designed to close the gap. Businesses also grew tentative on accumulating inventory.

The U.S. Commerce Department reported yesterday that America’s goods trade gap soared 8.5% to $68.3 billion last month. The reading prompted the Atlanta Fed to lower its fourth-quarter gross domestic product estimate to a 1.7% pace from a 1.9% rate.

Washington and Beijing signed a phase one trade deal this month that rolled back a limited number of tariffs, but don’t forget that U.S. duties remain in effect on $360 billion worth of Chinese imports.

President Trump yesterday signed the United States-Mexico-Canada Agreement (USCMA), which replaces the North American Free Trade Agreement (NAFTA). When it comes to USCMA, investors should (as the comedian Larry David might say) curb their enthusiasm.

My assessment is that USCMA is a hollow PR exercise that only marginally alters NAFTA. Credible analysts share my view. In return for appearing tough on trade, the U.S. has managed to alienate Canada and Mexico, two erstwhile allies.

The fact is, global trade negotiations over the past two years haven’t alleviated the U.S. trade deficit. (Not that the trade deficit actually matters, but that’s a complex topic for another column.) What the trade war has done, though, is put pressure on corporate profits, as reflected in weak fourth-quarter operating results.

Despite ostensible truces in the trade war, business confidence has been shaken by tariffs. The Commerce Department also reported yesterday that retail inventories were unchanged in December after declining 0.8% in November, a sign that the economy could contract in coming months.

In a separate report Wednesday, the National Association of Realtors (NAR) revealed that its pending home sales index fell by an unexpectedly sharp 4.9% in December, the largest drop since May 2010. The consensus estimate had called for a 1% month-over-month rise. NAR cited a shortage of houses on the market as the main culprit. Compared with one year ago, pending sales were up 4.6%.

A home is still the biggest asset of most Americans and remains integral to consumer confidence. When the real estate market prospers and unemployment is low, people feel wealthier. Instrumental in generating a “wealth effect” among Americans has been the steady rise in home prices since their collapse during the Great Recession of 2008-2009. But the wealth effect has diminished in recent months.

The cooling in December of the housing market is making investors nervous, because of the potential ripple effect throughout the economy and financial markets.

Don’t expect the Federal Reserve to come to the rescue this year. We’ve reached the limits of monetary accommodation. Central banks in Europe and Japan have pegged short-term policy rates below zero. The Fed has indicated that it will stand pat on rates in the foreseeable future.

Indeed, in a news conference Wednesday, Fed Chairman Jerome Powell pointedly rejected the notion that the U.S. central bank might adopt negative interest rates. Although the Fed lowered rates three times last year, the White House hasn’t been satisfied and continues to lobby for below-zero rates to stimulate the economy.

And remember, rates can’t stay low forever. They’ll eventually start rising again, especially as the massive U.S federal deficit takes its toll. As the deficit explodes, politicians are using the shortfall as an excuse to cut Social Security and other programs you’ll need in your golden years. That makes stock investing all the more important.

Read This Story: Social Security: The “Third Rail” No More

The news isn’t all bad. Strong Q4 earnings results from certain industry bellwethers, such as Apple (NSDQ: AAPL), are keeping stocks afloat. At the same time, though, fears over the coronavirus outbreak and lingering trade tensions are driving investors to safe havens, such as gold, the U.S. dollar, and utilities stocks.

Red metal rising…

Another “defensive growth” sector that’s poised to rise this year is commodities. My colleague, Dr. Stephen Leeb, is an expert on commodities. His prognosis for this asset class is bullish.

Dr. Leeb is the chief investment strategist of Real World Investing and The Complete Investor. In particular, Dr. Leeb thinks copper prices are about to go through the roof.

Copper is vital for building construction, power generation and transmission, electronics, industrial machinery, and transportation vehicles. Copper wiring and plumbing are mainstays of heating and cooling systems, appliances, and telecommunications links.

The practical uses of copper pervade our daily lives. The modern world can’t function without copper, but Dr. Leeb asserts that the world is running dangerously low on supplies of the so-called “red metal.”

When the supply of an essential commodity is shrinking and demand is booming, prices are primed to soar. Click here for Dr. Leeb’s favorite copper play.

John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com