Warren Buffett expressed caution around overpaying in his most recent letter. Jamie Dimon – JP Morgan CEO – said today there’s a 50% chance of recession – with a soft landing slim. News of falling consumer confidence and rising credit delinquencies also hit the tape today. This begs a question: is the consumer in 2024 stronger than what we saw in 2023? My guess is no.
Macro / Economy
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Powell Won’t be Bullied
As we started this year – I felt the market was getting ahead of itself. Not only was the tape approaching an overbought zone – it also assumed as many as six rate cuts (possibly seven) before the end of the year. What’s more – it also priced in that earnings per share (EPS) would grow 12% year on year. It felt like a contradiction. For e.g., either the economy was reeling and needed (emergency) rate cuts; or the economy is expanding strongly (supporting earnings growth)? Today Fed Chair Jay Powell pushed back on the former. Markets should not expect rate cuts as early as March… stocks didn’t like it.
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.