Never take a headline print at face value. There’s always more to the story – where it pays to dive into the details. Digging below the surface takes some work – however it’s worth doing. Last week was a great example. The BLS told us 336,000 jobs were added vs expectations of 160,000. Sounds strong? But was it? Not really. For example, since June 2023, full-time employment is lower by some 696,000 jobs
"Interest Rates / Bonds"
Not Just Equities Trading ‘Per the Script’
A little over 2 months ago – I described the market as “euphoric”. For example, valuations were in excess of 20x forward earnings – despite what we saw in bond markets. Something was horribly wrong. My simple advice was do not add to positions at those levels. The downside risks were just too high. My thesis was whilst stocks could easily rally to ~4500 — any further meaningful upside felt ‘limited’ . Turns out we didn’t go too much higher. Now stocks could easily catch a bid in the 4200 zone – that’s what I expect. However, the risk/reward still doesn’t look that favourable…
September Didn’t Disappoint
Coming into September – I reminded readers it has the worst record of any calendar month. The Trader’s Almanac tells us the S&P 500 has lost an average of 1% each September over the past 10 years. And over the prior 25 years – the average monthly returns are -0.67%. Dismal. This year, the S&P 500 gave back 4.9% for the month. But it wasn’t just September – stocks hit the pause button after June. For the quarter, the Index surrendered 3.64%.The Nasdaq fared far worse – losing 4.12%. None of this should come as a surprise…
Bye Bye Sugar High
Are equities finally connecting the dots? Maybe. Whilst this has been a difficult market to trade – my sense was to approach with caution. From mine, there were too many open questions. For example, when the market was trading around 4600 – my sentiment was the downside risk outweighed any upside reward. We are now ~8% lower… closer to the zone of where I felt the S&P 500 could trade. In short, valuations were stretched. Put another way, the risk premium for owning stocks wasn’t there. But markets pushed higher – taunting the Fed on their “higher for longer” script.
For a full list of posts from 2017…