well this is interesting....this kind of economic news would have had us down 3% a couple months ago. Now we're down just a percent or less, and the VIX is barely budging at just 20.
I do think we'll fall off as the day goes, but if we end the day at down just 50 or 75 bps that would be very bullish I think...It would suggest the market is convinced inflation is ending and rates can come down. It would suggest that wages can rise without forcing up interest rates.
but let's get through the day first, obviously.
So we end the day down very little, like almost flat (just slightly up or down depending on the index) for the day. And this is just when I starting hoping we would revisit the early November lows so that i could buy back shares of a tech ETF I sold rather than going into the red on them. An untimely sale, so it would appear.
If it does drop, I'm buying back those shares, so part of me is wishing for a drop (and so it probably won't happen).
But yeah, it really does feel like the markets have moved past inflation fears, and if anything is a concern, it is the risk of a recession, which seems to be diminishing as well.
the boys and girls at the inflation nowcast are not pleased by the latest numbers...they upped their estimates of current inflation after this. Which is not bulllish.
But still..they think the current inflation run rate is around 5%. Which is far lower than the 8% it was earlier in the year.
So we end the day down very little, like almost flat (just slightly up or down depending on the index) for the day. And this is just when I starting hoping we would revisit the early November lows so that i could buy back shares of a tech ETF I sold rather than going into the red on them. An untimely sale, so it would appear.
If it does drop, I'm buying back those shares, so part of me is wishing for a drop (and so it probably won't happen).
But yeah, it really does feel like the markets have moved past inflation fears, and if anything is a concern, it is the risk of a recession, which seems to be diminishing as well.
the boys and girls at the inflation nowcast are not pleased by the latest numbers...they upped their estimates of current inflation after this. Which is not bulllish.
But still..they think the current inflation run rate is around 5%. Which is far lower than the 8% it was earlier in the year.
Very much appreciate the updates!
It will be interesting to see how household debt factors into all this over time. It seems that much of the ability for the economy to keep roaring ahead, amidst higher prices, are consumers taking on higher levels of debt. Can this be sustained, and is it temporary or more long term. The ultimate effect of inflation may be being dampened by this factor, which may not be sustainable over the long term.
They say higher income households are spending like they always have and have not been impacted.
A “step down” by the Fed from 75 bps to 50bps (which is neither a pause nor a pivot) is not really dovish … it would still be in the camp of larger hikes going back a few decades pic.twitter.com/TSCDWcw3L9
the boys and girls at the inflation nowcast are not pleased by the latest numbers...they upped their estimates of current inflation after this. Which is not bulllish.
But still..they think the current inflation run rate is around 5%. Which is far lower than the 8% it was earlier in the year.
Very much appreciate the updates!
It will be interesting to see how household debt factors into all this over time. It seems that much of the ability for the economy to keep roaring ahead, amidst higher prices, are consumers taking on higher levels of debt. Can this be sustained, and is it temporary or more long term. The ultimate effect of inflation may be being dampened by this factor, which may not be sustainable over the long term.
They say higher income households are spending like they always have and have not been impacted.
I don’t think much will change without a hard landing and severe recession. We all would be better off with a negative outcome, without it we will only be on hold.
It will be interesting to see how household debt factors into all this over time. It seems that much of the ability for the economy to keep roaring ahead, amidst higher prices, are consumers taking on higher levels of debt. Can this be sustained, and is it temporary or more long term. The ultimate effect of inflation may be being dampened by this factor, which may not be sustainable over the long term.
They say higher income households are spending like they always have and have not been impacted.
I don’t think much will change without a hard landing and severe recession. We all would be better off with a negative outcome, without it we will only be on hold.
I can't rule that out, but doubt it.
Maybe, like Powell says, it will take a long time to get inflation back under control, and if so, we trade flat for longer than we would like. We as in those of us who aren't betting against the market.
“Given continuing concerns in the market about a possible recession, are analysts lowering EPS estimates more than normal for S&P 500 companies for the fourth quarter?
The answer is yes. During the months of October and November, analysts lowered EPS estimates for S&P 500 companies for the fourth quarter by a larger margin than average. The Q4 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q4 for all the companies in the index) decreased by 5.6% (to $54.58 from $57.79) from September 30 to November 30.”
“Some more charts to befuddle you: Increase of BOTH SIDES of the Fed's balance sheet since March 2020.”
I would assume as you move further away from the norm requires increasing levels of unconventional policy to manage. So you pay banks interest on excess reserves.
“The correlation is +.032 and the R^2 is 0. If we look at the quarterly correlation; R^2 is .0887 but the correlation is now negative, -.298!”
Of course there are other things going on. Lag time alone would make quarterly comparisons weak. Pretty clear the Fed balance sheet has had an enormous affect on all asset prices. What do you think would happen if that balance sheet was reduced at the same pace it expanded, and now? Of course the Fed cannot. They are in a box.
I don’t think much will change without a hard landing and severe recession. We all would be better off with a negative outcome, without it we will only be on hold.
Jeremy Grantham, who is almost always bearish, threw in the towel in 2017 and said that stock market valuations are likely to stay elevated over prior eras, and waiting for mean reversion on valuatoins and margins is likely to be a fool's errand.
He has been right so far - margins and valuations have remained high compared to the past. This has come up on this thread - discussions of why the US market has a PE higher than the past and if that is a problem or not. So far, not.
Interesting read from March of 2021 that seems relevant today. It's about the massive stimulus bills being passed by congress and calling them a ginormous economic experiment.
it runs through the possible outcomes and was fairly accurate. It did suggest that inflation was a potential problem but all in all inflation is better than a long recession. That the good economies of the 50s and 90s had high inflation and that was ok.
This analyst thought we had an 82% chance of making money in 2022. Once again, the pandemic made unlikely things happen.
After a nearly 29% total return for the S&P 500 this year, history suggests 2022 may see more gains for investors. Truist Advisory Services co-chief investment officer Keith Lerner found that going back to 1950, when the S&P 500 had a total return of at least 25% in a year, stocks usually rose in the following year. The outcome during that 71 year stretch: stocks advanced 82% of the time, or 14 out of 17 instances.