Tag: economy

How Low Will Valuations Go?

How Low Will Valuations Go?

The S&P 500 is approximately at its long-term average P/E multiple of 20x (if one looks back to 1964). However, that multiple could go lower should the Fed hold rates higher for a longer period than what many investors expect. Further, markets tend not to bottom until after the Fed begins to cut rates (we … Continue reading How Low Will Valuations Go?

CPI: A Long Way To Go To 2%

CPI: A Long Way To Go To 2%

Headline CPI came in at 6.5% year-over-year and down -0.1% for the month of December. Core CPI was up 5.7% year-over-year and up 0.3% for December, up from 0.2% in November. Readers know how we feel about price inflation - it is higher than what the government reports. Take "eggs" for example which we recently … Continue reading CPI: A Long Way To Go To 2%

Consumer Confidence Will Turn On A Dime

Consumer Confidence Will Turn On A Dime

Despite today's uptick in Consumer Confidence, I suspect the measure will turn on a dime (negative sentiment), early next year as job losses mount, as rates remain elevated, as the market rolls over and as the housing market collapses. I expect forced selling in the housing market whether it be of primary homes, secondary homes … Continue reading Consumer Confidence Will Turn On A Dime

Fed Projections: Too Optimistic

Fed Projections: Too Optimistic

The Fed's current projections are more realistic than those made in September but continue to reflect a degree of wishful thinking. Unemployment Rate & Real GDP. It is difficult for me to believe that Real GDP Growth will be flat in 2023 at 0.5% as the Unemployment Rate increases from 3.7% to 4.6% over the … Continue reading Fed Projections: Too Optimistic

Technology Layoffs Continue To Climb

Technology Layoffs Continue To Climb

More Technology-related layoffs have occured in Q4 2022 than at the COVID economic trough in Q2 2020 (51,048 employees in the month of November 2022). Technology layoffs continue to mount as: interest rates climb; inflation remains elevated; global demand sputters and; as macro-economic uncertainty remains high. Check out Layoffs.fyi (created by Roger Lee), to track … Continue reading Technology Layoffs Continue To Climb

Not So Fast. This Won’t Be Quick & Painless.

Not So Fast. This Won’t Be Quick & Painless.

The 2008 downturn and the current downcycle have similarities as far as investor sentiment is concerned. We believe that investor sentiment will sour early next year as Q4 2022 earnings reports come in. 2023 earnings estimates and stock prices will move lower off of the Q4 EPS reports. Early cycle disbelief. I recall that in … Continue reading Not So Fast. This Won’t Be Quick & Painless.

Must The Fed Shatter The Economy? No, But It Will.

Must The Fed Shatter The Economy? No, But It Will.

The Fed does not have to shatter the economy to fight inflation. However, it will. There is a better solution. We break the article into 5 sections. Sections 1 and 2 provide background on how we arrived at the current inflationary state. Sections 3 and 4 describe a weak economy where monetary policy has already … Continue reading Must The Fed Shatter The Economy? No, But It Will.

What Would Cause The Fed To Pivot?

What Would Cause The Fed To Pivot?

Credit Markets (Yes): A liquidity crisis would cause the Fed to pivot. If the credit markets seized up the Fed would intervene. Market intervention is after all the Fed's operating model (as is the case for all central banks). Consumers and investors would have to lose confidence in the U.S. Economy to the point where … Continue reading What Would Cause The Fed To Pivot?

It Always Makes Sense To Invest In Quality Names

It Always Makes Sense To Invest In Quality Names

Many Technology investors got religion on August 26th as it relates to interest rate increases (more to come) and a Fed pivot (not any time soon). The message of "higher for longer" was reiterated yesterday by Fed Chair Powell. The Fed tends to undershoot when it comes to inflation and its Fed Funds target. We … Continue reading It Always Makes Sense To Invest In Quality Names

A NASDAQ Bottom. QT Or Not To QT?

A NASDAQ Bottom. QT Or Not To QT?

If the Fed raises by 100 BPS tomorrow we believe there is another 10% downside to the NASDAQ before October earnings. We believe the NASDAQ will continue to work lower as the Fed hikes its Fed Funds Rate and as Treasury yields climb. We expect the Fed's rate hiking will stop by early next year … Continue reading A NASDAQ Bottom. QT Or Not To QT?