Wage Growth of 5.2% to Strengthen Fed’s ResolveThe 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 SkyOver 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.
Don’t Fight the FedMarty Zweig's 1970 book "Winning on Wall Street" popularized the term "don't fight the fed". Today we have an environment where: (a) liquidity is contracting; and (b) rates are tightening. That's not conducive for higher prices.
The Bull vs Bear Battle Lines are DrawnThe bulls have market momentum supported by solid breadth. We are past peak inflation (it would seem) which lends itself to a more dovish Fed (in theory). However, valuations are high - trading 18.5x forward. What's more, the Fed is withdrawing liquidity - not adding to it. That's an argument for the bears.
The “Everything Rally” as CPI Comes in at 8.5% YoYThe market has now rallied to a zone of potential resistance (4200 to 4400). The next few weeks will be a strong litmus test for market. My guess is we roll over...
Do Upside Gains Easily Outweigh the Downside Risks?With the S&P 500 some 14% off its lows - trading just below 4200 - at 17.5x fwd PE - what's the potential upside reward? And do those potential gains outweigh the downside risks?
Stay Patient – Pullback ComingWhen prices are rising (as they are today) in a bear market -- all too often sentiment will shift prematurely. It's called a bear-market trap. And I think this is what we are seeing...
Why Bad (Jobs) News Could be Good NewsA 'bad print' for the number of jobs created (or lost?) over July could actually be good news for stocks. On the other hand, a strong number only amplifies the Fed's resolve to hike
Risk On? Or Classic Bear Trap?The S&P 500 is up 14% from its June lows. But from mine, this is still a bear market rally. The Fed is far from done.
Walmart Cuts Earnings b/w 11% – 13%Add Walmart to the growing list of names slashing guidance. But this one is notable... especially given their read-through on the average consumer. What did we learn from the US' largest physical retailer.
