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.
The 40-Year Tectonic Shift2022 will be remembered as an important turning point. Not because the S&P 500 surrendered 15% to 20%... it will be remembered for the tectonic shift in monetary policy. For the first time in over a decade - interest rates are finally trading at closer to "normal levels". What's more, we are not going back to 0% to 2.0% rates for a long time. And that has many implications for how to choose to invest...
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...
Powell Pop… Don’t Get Too ExcitedThe market is popping on the hope of a more dovish Fed going forward. Chairman Jay Powell gave the market 'hope' by saying the Fed is likely to moderate the pace of hikes. But is that 'really' that bullish?
Oil: 2023 Supply Shock Coming?2022 delivered the market a nasty oil shock. But will it be the last? I don't think so. The oil price shock in 2023 will be due to massive underinvestment from the US in hydrocarbons (which still power 80% of all our energy needs). And if oil should fall to $65 to $70 - that spells opportunity for the year ahead - where I see oil back above $100.
Watching the VIX for a Market ReversalWith the VIX approaching a level of 20 - the market feels overly complacent. The S&P 500 is now around 15% off its October low - resembling what we saw in June. My guess is should we see the VIX below 20 - expect the market to reverse shortly thereafter.
A Framework when Thinking about the FedHow fast? How high; And for how long? That's the framework when thinking about the Fed's policy moves. From mine, the market are offside in terms of how high and particularly how long. What we do know is the pace will slow.
My Hypothesis into Year EndI have four key hypothesis into how I am positioned for year end: (i) 2023 will bring a recession; (ii) earnings will contract; (iii) multiples will compress; and (iv) it's premature to think about fighting the Fed. Let's explore...
Classic Bear Market RipStocks are likely to push higher through to the end of the year. It's what we usually find after mid-term elections. But for now, this feels like another bear market rally... which will likely find resistance around the zone of 4100 on the S&P 500. We are a long way from any Fed "pause or pivot"...
“Rip Your Face Off Rally“… But What’s Changed? It's what you might call a "rip your face off rally". Short traders are caught on the wrong side and scramble to cover... that's what happened today as CPI came in slightly lower than expected. But is it reason to be jubilant? Hardly.
Inflation: How Hot is ‘Too Hot’?CPI for October is likely to come in hot... expect a high 7-handle. But how much is too hot? Anything north of 8% cements another 75 bps; however something closer to 7.7% may give some hope the Fed can tap the brakes.
