S&P 500: ‘False Break’ Warns of PullbackThis week the S&P 500 performed a 'false break' of its previous 4100 high. Technicians see this as a reliable reversal signal. However, on the other hand, there are bullish arguments we can make. The mix of bullish and bearish technical signals make shorter-term 'tactical' trading very difficult (that's not my game). Here's how I'm thinking about it...
Market Refuses to Believe the FedThe S&P 500 is optimistic on three things (a) avoiding a recession; (b) rapidly falling inflation; and (c) two rate cuts before the end of the year. And the market could be right. However, I think it's optimistic. What's more, they are choosing to fight the Fed.
It’s Earnings Season – Will They Meet Expectations? Earnings seasons starts this week (Friday) with the banks. Across all sectors - analysts expect earnings to expand by 4% in 2023 - or around $230 per share for the S&P 500. If we don't experience a recession - this feels probable. However, that's the question - are we likely to experience a contraction? If so, it's most unlikely we will see expansion - which implies the S&P 500 feels expensive around 4100.
Foolish Forecasts and Questions Worth Asking It's the last trading day for 2022 - which means it's time for some 'foolish forecasts'. The S&P 500 booked a 19.4% loss this year... its 4th worst since 1945. My foolish forecast is the lows are not yet in... however 2023 will represent opportunity.
What Will Lead in 2023?What sectors will lead the market higher in 2023? Tech? Financials? Healthcare? Industrials? Tech was the right play for the past decade - with rates anchored at zero and the Fed printing money. That has now changed. Tech will unlikely act as strong as it did... which requires a shift in asset allocation by investors.
PatienceTraders (and investors) are wise to remain patient through this tightening Fed cycle. And whilst it is maturing... there's still more to go. Here I take a look at recent recessions... and some lessons to draw from. Don't be in any hurry here - we are likely to be headed lower
Excited About the Opportunity Ahead!I bring good news and bad news. The good news? We have done a lot of the heavy lifting. The rate rise cycle is maturing. Inflation is falling. And China appears to be re-opening. Now the bad news... rates are not about to repeat what we saw the last decade. And the Fed is sucking out liquidity. What's more - corporate earnings are about to contract. Put that together - stock prices will likely fall. And that will represent opportunity...
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.
A Textbook ReversalWe'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.
Sorting the ‘Wheat from the Chaff’ in 2023There are two key criteria that every investor should execute in 2023. What worked for the past decade will not be the same for the next decade. Interest rates are going to be higher for longer. This post explores what that means...
