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Do You Trust this V-Shaped Rally?
Markets staged a ‘rip your face off’ rally on the back of Trump’s 90-day pause on 145% tariffs with China. Over the past three months – the rally ranks among the best we’ve seen in three decades. The question is can it continue; and what needs to happen? My primary concern – it’s not supported by any major change in monetary policy…
Market Sweats Trump Tweets Over Powell
What matters more to the market: (a) a Trump tweet on any potential trade deal; or (b) Jay Powell’s statement on monetary policy? If you ask me it’s the former. Today’s statement from the Fed was almost a non-event for the market. Powell maintained rates in the 4.25% to 4.50% target range (which was expected). However he told the market that the risk of “higher unemployment and higher inflation” have risen since their last meeting. That’s problematic…
What Do Q1 Earnings Tell Us?
We’re about half way through Q1 2025 earnings. So far they’re showing double-digit YoY growth. However what companies are struggling with is guidance. They have very limited visibility through the “tariff windshield”. And whilst stocks are reacting well to past earnings and optimism Trump will back down on his draconian tariffs – it’s difficult to gauge both how much damage has been done? For now, markets remain optimistic however I would treat this rally with caution.
Large Cap Tech: Cautious on Guidance
When Charlie Munger was asked the secret to his success – he answered “I’m rational.” Rational is not paying “33x forward earnings” for a company like Apple or Microsoft – despite their quality. Rational is also not selling the S&P 500 when it plunges to trade at just 16x forward earnings – because you are worried about a possible recession. Rational is adding exposure to high quality assets when they are at or below their long-term mean. And the more below the mean they trade – the stronger your (long-term) conviction should be.
For a full list of posts from 2017…