Warren Buffett is pouring tens of billions of Berkshire money into short and longer-term bonds. And I’m not surprised… For e.g., Jul 9th I offered this post “Think About Adding Bonds”. Shorter-term bills were offering investors ~5.50% and the longer-date 10-year bond above 4.0%. That’s attractive for a number of reasons… this post explains why.
Half Way Through Earnings: 81% Beat on EPS
This week was the busiest week of earnings on the calendar. Half of all S&P 500 companies have now reported for Q2. So far so good! 81% of companies have beaten earnings per share (EPS) expectations – by an average of about 6.4%. By way of comparison – prior to COVID – the average EPS beat was in the realm of ~3%. What’s more, about 64% of all companies have also beaten top line expectations. The question is will this continue in the second half?
Can Consumers Continue to ‘Shop ’til they Drop’?
Never underestimate the US consumer’s willingness to spend. And from mine, that’s been the story of this year. Consumers have used whatever means available to spend, spend, spend. With ~70% of US GDP consumption based – that has also meant the economy managed to keep its head above water. But what does it look like going forward?Do consumers still have ultra-strong balance sheets to keep it up? And are rates eventually going to bite? I ask this because if US consumers are closer to maxing out their credit cards (with more than $1T in debt)… the odds of a recession sharply increase.
Fed Can Keep Raising w/Core CPI 4.8% YoY
The market celebrated the June monthly CPI data. Headline CPI came in at just 3.0% YoY – and Core CPI fell to 4.8% YoY. Good news. However, with Core CPI still more than 2x the Fed’s target – expect them to raise rates again at the end of the month. However, what surprises me is the market believes the war with inflation is basically done. Is it? I think that is presumptuous. The fight with Core inflation will be a long one. If correct, the Fed may not need to keep raising rates aggressively – however are likely hold them there until their objective is met.
For a full list of posts from 2017…