Remain Wary of PermabearsJeremy Grantham is a well known permabear. This week - he called for a possible 50% correction. Sure... it's probable we see something in the realm of 20%... but 50%? I decided to look at Grantham's track record against the S&P 500 over 25 years. Guess what - he has woefully underperformed the market. Hardly surprising. Beware of doomsday 'crash callers' like Grantham... and he is not alone. They are dangerous.
Thinking Through Both the Bull & Bear CaseAre you a bull or a bear? That answer will largely depend on your timeframe. However, there are solid arguments for both the bull and bear case in the near term (next 12 months). This post looks at each and why I still lean bearish in the near-term. However, I will treat any meaningful dip (eg 10%) as a buying opportunity.
Is Bad News finally Bad News?Soft landing? That's the market consensus. I am not buying it. For example, retail data for December was horrible - it's third straight month of declines. Are US consumers tapped out? Their savings rates are now at all time lows? Keep your eye on credit quality - how is that looking?
Peeling the Inflation OnionFed President John Williams uses the analogy of an onion when describing inflation. For example, the outer most layer consists of commodities. The middle layers consists of goods. However, the inner most layer - its core - consists of services. And it's services inflation which generates inflation inertia. And that's the mechanic which the Fed are exclusively focused on...
December CPI – The Good and the BadThere was a little of something for the bulls and the bears with December's monthly inflation report. On the surface, inflation is coming down. However, if we look underneath the hood, most of that inflation is goods. Services inflation however remains doggedly high (i.e. wages). And whilst goods inflation could fall to "zero" - if services inflation remains twice the Fed's 2.0% objective - they will continue to tighten (even if that means simply holding rates at a higher level)
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.
Fed Gets Green Light… Market Thinks OtherwiseThe market ripped higher on news of a softer-than-expected wage inflation report. But haven't we seen this script before? Markets have a recent history of front-running the Fed... only to be bitterly disappointed. From my lens, nothing in this print changes the script for the Fed. And markets are not set up to hear that...
5 Charts to Shape 2023Inflation, rate hikes, the US dollar and bond yields all shaped how things traded in 2022. What will shape investment strategies and sentiment this year? From mine, look no further than what we see with employment, wage inflation and economic growth. And from there - how this dictates the pace and duration of Fed tightening.
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.
Lessons from the 2022 Bear MarketIt was a difficult year for traders and investors alike. The Index is on track to lose at least 19% - it's worst year since 2008 and 4th worst since 1945. However, this year also offers us valuable lessons. What worked? What didn't? What could we have done differently? And what can we take into 2023...
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.
Powell’s Single FocusDuring 2022 - the market obsessed over one thing - inflation. How high? How fast? And for how long? That concern is now largely behind us... however investor's gaze is about to pivot from CPI worries to employment (specifically entrenched wage growth). If Powell is to be successful in winning the war against structurally entrenched inflation - he needs to bring wage growth down to 2%. Today that figure remains above 5.0%. That's going to take time... and is the market potentially caught offside?
