Q4 2023 earnings are starting to hit the tape. From mine, if the market is to continue rallying – it’s less about inflation and the Fed – it’s whether corporate America will deliver on 12% earnings growth in 2024. Coming into earning’s season – my view 12% felt ambitious – given the slowing economy and relative health of the consumer. This post talks more to the concentration in the market – the relative influence from NVDA – and why diversification will be key this year.
Lessons
Actionable market insights delivered to your inbox weekly
Equal Weight ETF to see Mean Reversion
The euphoria in markets continued last week – with the S&P 500 notching a new record high – taking out the 4817 high from Jan 2022. Thanks largely to the Fed signaling peak rates in combination with inflation trending lower – markets now believe a ‘soft landing’ is possible. That is, inflation ultimately trends back to the Fed’s objective (2.0%) without any negative impact to the broader economy (e.g. widespread job losses). We will see how that turns out – as the Fed is attempting to thread a narrow needle. From mine, a soft landing remains a lower probability outcome. However, I believe there is still opportunity… and it’s not with large cap tech stock.
Jobs Data: Choose Your Narrative
Today we learned that December added 216K jobs. CNN reported it as a “red hot” print. Was it? From mine, the headline number offers us very little. For example, what I want to know is the following (a) where are the jobs are being added (e.g. public vs private sector and what sectors); (b) what are people being paid per hour (is it rising or falling?); (c) are people working longer hours (as part time work doesn’t pay a mortgage); and finally (d) what’s the prevailing trend (as one month’s data doesn’t account for much). The headline number doesn’t provide this detail – therefore we need to dig a little. My quick take – this report is weaker than what the headline suggests.