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The One Thing Driving the Market
It’s risk on. That’s the market’s sentiment. Question is whether that risk is worth it? There are only a handful of stocks carrying the market higher – a sure sign of both fragility and bearishness. Are there are only “10” stocks that can grow? We have not seen a market this narrow since the dot.com bust. Now should names like Amazon, Google, Apple, Microsoft, Meta and Tesla pull back from nose-bleed valuations – the whole house comes down with it.
Surface Cracks Appear in Credit
If there’s one thing that keeps the US going… it’s the availability of cheap credit. Love it or hate it – the US is a credit driven economy. If credit dries up – it’s goodnight nurse. The US consumer now owes close to $1Trillion on their credit card – a 17% jump from a year ago and a record high. More than 33% U.S. adults have more credit card debt than emergency savings
Expensive and Risky
Stan Druckenmiller – one of the greatest investors of all time – is issuing a stark warning. Tread carefully. He echoes much of my sentiment of the past few months; i.e. not only do I think the market is fully valued at 19x forward earnings — it represents meaningful downside risk. What concerns me most is what the market assumes will happen over the next ~6-9 months. E.g., at the time of writing, it sees rates being slashed three times this year. Is that realistic with Core CPI YoY is still traveling around 5.5%? It also sees earnings growth. Will that happen opposite a recession? It’s a long list of assumptions…
Should We Cheer the Latest Inflation Report?
April Consumer Price Inflation (CPI) headline came in at 4.9% – its lowest level since Feb 21. However, Core CPI was 5.5%. As we know the Fed are more focused on Core. Here’s what the Fed will be watching – it’s all about labor and shelter.