Actionable market insights delivered weekly
Categories
AI
Asset Allocation
Big Tech
Books
Bubbles
Charlie Munger
China
Commodities
Consumer Confidence
Consumer Spending
Credit
Cycles
Debt
Discounted Cash Flow
Earnings
Economic Cycles
Employment
Equity Risk Premium
ETFs
Fed Reserve
Finding Value
Forecasting
Generative AI
Geopolicitics
Gold
Geopolicitics
Lessons
Macro/Econ
Magnificent Seven
Geopolicitics
Monetary Policy
Money Supply
Nvidia
oil
Precious Metals
Property
Quantitative Easing
Rates & Bonds
Real GDP
Real PCE
Recession
Retail Sales
Risk
S&P500
Sahms Rule
Soft Landing
Stocks
Tariffs
Trade
Trump
US 10-Year Yield
Valuations
VIX
Warren Buffett
Yield Curve
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.
US Dollar Rally Ahead?
Are we about to see a US Dollar Index (DXY) rally sometime over the next few months? If I were to guess – yes. And if that’s correct – it’s not a tailwind for markets (or earnings). Before I look at the weekly chart – not all participants agree. Bank of America Securities views any strength in the US dollar index (which trades against a basket of six currencies) as short-lived and prefers to fade any greenback rallies. And that is probably accurate in the very short term.
Focus on High Quality in Challenging Markets
It’s my thesis market returns over the next few years are unlikely to match what we’ve seen over the past decade. However, I’m also of the view that will create great opportunities for savvy patient investors who think long-term. This missive defines what is meant by “quality” investments – and the attributes investors should focus on. And if we are see a more challenging climate the next few years – it’s higher quality assets which will shine.
For a full list of posts from 2017…