Category Macro / Economy

Powell’s Single Focus

During 2022 - the market obsessed over one thing - inflation. How high? How fast? And for how long? That concern is now largely behind us... however investor's gaze is about to pivot from CPI worries to employment (specifically entrenched wage growth). If Powell is to be successful in winning the war against structurally entrenched inflation - he needs to bring wage growth down to 2%. Today that figure remains above 5.0%. That's going to take time... and is the market potentially caught offside?

Is the Market Fighting the Fed?

The market and the Fed are at odds. In short, equities don't believe what Powell is saying. The market is betting the Fed is wrong and will be cutting rates by the second half of 2023 - where the 'dot plot' of 5.0% is a dream. My take: choose to fight the Fed at your own peril. Typically it doesn't work out well.

The 40-Year Tectonic Shift

2022 will be remembered as an important turning point. Not because the S&P 500 surrendered 15% to 20%... it will be remembered for the tectonic shift in monetary policy. For the first time in over a decade - interest rates are finally trading at closer to "normal levels". What's more, we are not going back to 0% to 2.0% rates for a long time. And that has many implications for how to choose to invest...

A Textbook Reversal

We've experienced a 16% rally off the October lows. And it's happened in short time. Why? Traders see a far more dovish Fed on much lower inflation / coupled with a mild recession. I'm not buying it... not yet.

My Hypothesis into Year End

I have four key hypothesis into how I am positioned for year end: (i) 2023 will bring a recession; (ii) earnings will contract; (iii) multiples will compress; and (iv) it's premature to think about fighting the Fed. Let's explore...

Bear Market Rally Approaching Resistance

My best guess is the current 11% bear market rally could go a little further yet (e.g. maybe 5-6%). However we are now approaching a technical area of resistance. I also offer a new trade on TLT... on the thesis that yields will reverse course at some point in 2023

Market Psychology: Buying Well When Mr. Market is Fearful Market Psychology: Buying Well When Mr. Market is Fearful

Market Psychology: Buying Well When Mr. Market is Fearful

Markets are slowly but surely starting to look better. Yes - they are 25% off their highs - but that's a healthy development. The way we make money is buying well. And with a little patience - we hope they go lower. My S&P500 target remains around 3200...

Druckenmiller Warns of 2023 ‘Hard Landing’

There are few smarter in the investing world than Stan Druckenmiller. For 30 straight years he averaged a 30% CARG whilst not having a single losing year. It's unparalleled. He is warning that stocks are still over-valued (despite a 24% correction) and a hard-landing is likely by the end of 2023

Wage Growth of 5.2% to Strengthen Fed’s Resolve

The US economy added 315K jobs in August. Good news. However, wage inflation ripped higher at 5.2% YoY. Based on this, it's likely the Fed will continue with a period of 'unusually high' rate hikes to reduce demand and wage inflation.

Trees Never Grow to the Sky

Over the past three decades - I've developed a strong appreciation for market cycles. For example, I know that it's impossible to predict the future with any certainty. However, what I can do is prepare based on what I know to be true.