Category Real GDP

The 1,100 Point Gap: Why 22x Earnings Defies the Gravity of 0.2% GDP Contraction The 1,100 Point Gap: Why 22x Earnings Defies the Gravity of 0.2% GDP Contraction

The 1,100 Point Gap: Why 22x Earnings Defies the Gravity of 0.2% GDP Contraction

If we needed confirmation that economic growth is slowing - today we got it. The US economy shrank at the start of the year, restrained by weaker consumer spending and an even bigger impact from trade. Gross domestic product (GDP) decreased at a 0.2% annualized pace in the first quarter. And there were also warning signs from the labor market...

The Pivot from Inflation to Growth: Are Markets Mispricing 2025? The Pivot from Inflation to Growth: Are Markets Mispricing 2025?

The Pivot from Inflation to Growth: Are Markets Mispricing 2025?

Some people are concerned about mounting inflationary risks. For example, it was only last week the Fed raised its inflation projections - where core inflation is expected to grow at a 2.8% annual pace, up 0.3 percentage points from the prior reading. And whilst inflation may remain sticky in areas like services and shelter (which I will talk to more shortly) - I think we should be more concerned with growth.

Growth Defies Fear

In my experience - growth ultimately defies fear. And whilst stocks will always climb the wall of worry - over time - growth prevails. The challenge for investors is the pathway is rarely in a straight line. Put another way, markets are constantly in a tug-of-war between opposing forces. Consider what we see today... we have a surprisingly robust US economy, defying expectations of a slowdown. Tailwinds include Fed easing, disinflation and a consumer which continues to spend. The counterforce to the further growth are escalating geopolitical tensions in the Middle East - which threaten to disrupt the global economic order

A Time of Transition

Think of a time when you worked through major transition in your life. For example, maybe it was the end of a relationship; a deep loss; changing your career; starting a family; or relocating for work. Generally during times of meaningful transition there is a period of adjustment and uncertainty. And sometimes, the change will come with volatility. From mine, it's possible the market's wild behavior this week is representative of one in transition. However, it's still early. Volatility in stock markets are typically associated with meaningful turning points... this posts explore more about what's happening below the surface; and why I think the 20-year era of cheap money is drawing to an end.

Real PCE: Seeing Around Corners

As an investor, your job is to carefully assess the risks against the rewards. A large part of that equation is knowing exactly where we are in the business cycle. For example, consider the following questions: (a) do you think we're at the beginning or middle of an economic advance (with more to go)? or (b) do you think we're about to encounter a significant change in direction? and (c) if so, is that change for the better or for the worse? Your answer is very important. It's far better to invest (or take more risk) at the start of the business cycle vs the end. Therefore, how will make that decision? How are you able to determine where we are? I will offer a market signal which is arguably more consistent and reliable than most indicators.