If there’s one thing that keeps the US going… it’s the availability of cheap credit. Love it or hate it – the US is a credit driven economy. If credit dries up – it’s goodnight nurse. The US consumer now owes close to $1Trillion on their credit card – a 17% jump from a year ago and a record high. More than 33% U.S. adults have more credit card debt than emergency savings
Macro / Economy
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Expensive and Risky
Stan Druckenmiller – one of the greatest investors of all time – is issuing a stark warning. Tread carefully. He echoes much of my sentiment of the past few months; i.e. not only do I think the market is fully valued at 19x forward earnings — it represents meaningful downside risk. What concerns me most is what the market assumes will happen over the next ~6-9 months. E.g., at the time of writing, it sees rates being slashed three times this year. Is that realistic with Core CPI YoY is still traveling around 5.5%? It also sees earnings growth. Will that happen opposite a recession? It’s a long list of assumptions…
A Very Narrow Market
Last week all eyes were on large cap tech earnings. They delivered a mixed bag… but on the whole ‘better than feared’. Q1 earnings didn’t fall off a cliff. Single digit growth (top and bottom line) was largely cheered – which highlights how low expectations were. Next week eyes turn to the Fed. The market has priced in a 25 bps hike for May – but will it be a ‘dovish’ hike – where they offer language to suggest a pause in June? Or will they say “there’s more work to do”?