The S&P 500 is optimistic on three things (a) avoiding a recession; (b) rapidly falling inflation; and (c) two rate cuts before the end of the year. And the market could be right. However, I think it’s optimistic. What’s more, they are choosing to fight the Fed.
"Macro / Economy"
Bear Market Rally? Or Something More?
About 100 of the 500 S&P companies have reported Q4 2022 earnings. TL;DR is they are ‘average’ at best. Most have barely met already lowered expectations. What’s more, forward guidance is weak. However, the bulls are betting on inflation continuing to plunge forcing the Fed to cut rates later in the year. I’m not yet prepared to support that thesis… with services inflation still running at 5.2%. There are some signs things are improving.
Remain Wary of Permabears
Jeremy 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 Case
Are 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.
For a full list of posts from 2017…