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.
Real PCE
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Consumer Confidence Sinks… Can the Market Rebound?
It was a roller-coaster week for stocks… maybe a hint of things to come? From mine, in the very short term, markets were deeply over-sold looking at its Relative Strength Index (RSI). Often when you see the RSI below a value of 30 – buying isn’t too far away. The last time stocks sank ~10% over a few days was 2020. However, in the absence of any crisis, generally this will see both short covering and/or bargain hunting. The bigger question is whether stocks can follow through? I don’t think we draw that conclusion yet…
Ready for a ‘Growth Scare’?
We started this year with the market pricing in only “good things”. We had (a) the Fed ready to continue its easing cycle; (b) business friendly administration looking to cut taxes and lower regulation; and (c) the promise ‘limitless’ returns from AI. Investor expectations were very high – evidenced by the valuation multiples they were willing to pay (whether it was P/E; P/FCF; EV/EBIT etc). Traders were all leaning to one side of the boat. However, shares prices have lost all momentum the past 12+ weeks.