On June 13th, the air in the room was dense with anticipation as Janet Yellen, current Treasury Secretary, addressed the American people with a forecast that sent ripples through the financial landscape. The US dollar, long-standing as the global reserve currency, might slow down.Yellen in Congress: Scrutiny and StrategyThe stage was set for Yellen in Congress, where she was questioned …
US Investors Love the USInvestors have put more than $86B into US equity mutual funds and ETFs this year, and on pace to be the second highest year since 2013 (last year’s record $156B). Of the $93B that was added to US or international equity funds, more than 90% has gone into ones owning US stocks. US stocks are nearly …
StocksThe market climbed 5.5% on Friday (maybe partly on a short squeeze). A basket of the most shorted stocks surged 11% >on Thursday. A market overrun by sellers is one that can see a lot of people change their mind very quickly (and result in gains greater than may be warranted). Since 2008, Thursday was the second biggest reversal of …
StocksA belief in peak hawkishness + prevailing pessimism of money managers (making them underweight) could keep this rally going. Fear of missing out perhaps? The market rallied, despite the widespread belief that this is a bear market rally, only making the Fed more aggressive. Highlights The decline in earnings growth for Q3 has largely been applied to growth stocks. Investors …
EarningsConventional wisdom is that when the Fed wins its fight with inflation, stocks will take off. But if inflation slows and wage inflation is sticky, margins will contract. Early in the cycle, inflation helps companies. Later on, it hurts margins. Analysts expect Q3 EPS of $55.67, up 2.6% YoY. Excluding energy companies, earnings would contract 3.9%. As economy slows, higher …
CurrenciesThe dollar rose 7.2% for the quarter – its strongest quarterly gain since 2015. It rose 3.2% in September. The dollar is being pushed higher by an aggressive Fed and the relative stability of the U.S. economy. The extreme dollar strength could lead to an unpredictable event. It’s been amazing to see the dollar rally while other central banks are …
MarketsThe stock market faces slower economic growth while central banks are trying to slow inflation, which has not subsided meaningfully. Q3 earnings growth estimates have dropped from 9.8% to 3.7% since June. Seven of 11 sectors are now expected to show YoY earnings declines. In periods of high inflation, earnings have historically peaked just two months prior to the start …
MarketsInvestors have survived a bear market. They’ve survived the fastest pace of rate hikes in decades. Yet, one bad week, and doubt has crept back in. While inflation is improving, we have no idea where it will level off. We also have no idea of when the Fed will stop raising rates. The outlook is highly uncertain. Inflation is showing signs …
The Jobs ReportThe employment report was shockingly strong. The economy added 528K jobs, and economists expected 258K. Leisure and hospitality, professional and business services, and health care saw the greatest job gains. Employment levels are back to Feb. 2020 levels, and we’ve recovered 22MM jobs in 2.5 years. Private sector employment is now 629K above the pre-pandemic level and government …
General EconomyEconomic activity is slowing in the U.S. and Europe. The composite US purchasing managers index fell to 47.5 in July (from 52.3). The drop in services was the biggest fall since May 2020. The rising costs of gas, food, and rent are prompting consumers to spend more on essentials and pull back on discretionary services. Highlights Economists now put the …
