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Real PCE & Wages Trend: Consumers Keep Spending
This week we received my preferred leading economic (and stock) indicator: real personal consumption expenditures (PCE). As a preface to this missive – as a long-term investor – our job is to carefully assess the risks. Part of that equation is knowing exactly where we are in the business cycle. For e.g., do you think we’re at the beginning or middle of an economic advance (with more to go)? Are we about to encounter a significant change in direction? If so, is that change for the better or for the worse?
Stocks Pause on ‘Less than Magnificent’ Earnings
October – synonymous for delivering market jolts – passed with barely a whimper. However, it was the market’s first negative month since April. Are stocks losing their mojo? In short, large cap tech earnings from five of the ‘Mag 7’ were less than magnificent. Meta, Apple and Microsoft all dropped post earnings. Google managed a small 5% rise initially – but gave it all back. Amazon managed hold gains of ~3%. This post talk to what the market expects from the nearly $1 Trillion in AI capex… and how their patience could be starting to wane…
Decoding the Drop in Oil
Middle East tensions are rising. However, oil prices are dropping. Why? The Israeli missile attacks on Iran, while not entirely unforeseen, triggered a negative response in the oil market. Now this may seem curious… contrary to expectations of a price surge due to heightened geopolitical tensions, crude oil prices plunged ~5%. In short, market sentiment tends to prioritize economic supply and demand concerns over (short-term) geopolitical risks
Stocks Losing Momentum
Are stocks starting to lose momentum? This week saw the S&P 500 reverse course – its first losing week since early September. Could there be more to come? My answer is yes – perhaps as much as 7-10%. However, it’s a question of timing. Irrespective, paying 22x forward earnings is a higher-risk bet.
For a full list of posts from 2017…