A Framework when Thinking about the FedHow fast? How high; And for how long? That's the framework when thinking about the Fed's policy moves. From mine, the market are offside in terms of how high and particularly how long. What we do know is the pace will slow.
My Hypothesis into Year EndI have four key hypothesis into how I am positioned for year end: (i) 2023 will bring a recession; (ii) earnings will contract; (iii) multiples will compress; and (iv) it's premature to think about fighting the Fed. Let's explore...
Classic Bear Market RipStocks are likely to push higher through to the end of the year. It's what we usually find after mid-term elections. But for now, this feels like another bear market rally... which will likely find resistance around the zone of 4100 on the S&P 500. We are a long way from any Fed "pause or pivot"...
“Rip Your Face Off Rally“… But What’s Changed? It's what you might call a "rip your face off rally". Short traders are caught on the wrong side and scramble to cover... that's what happened today as CPI came in slightly lower than expected. But is it reason to be jubilant? Hardly.
Inflation: How Hot is ‘Too Hot’?CPI for October is likely to come in hot... expect a high 7-handle. But how much is too hot? Anything north of 8% cements another 75 bps; however something closer to 7.7% may give some hope the Fed can tap the brakes.
Fed AftermathApple, Amazon, Microsoft and Google have all been crushed post earnings. Apple is the 'best' performer - down approx 13% the past two weeks. What's next for large cap tech? I see more downside... and this post explains why.
Powell: ‘A Long Way to Go’No pause. No pivot. It's enough to make "doves cry". However, Fed said there will be a time when they will slow down rate hikes. But we're not there yet... expect rates to be higher than previously expected.
More Tricks than Treats?The market is up around 11% from its recent lows. Its rallying on the hope of a dovish Fed. My advice is tread carefully... you might get 'tricked' rather than 'treated' this Halloween. The upside does not handily outweigh the downside risks. Bear markets are known to do just that...
We’ve Seen This Script BeforeQ3 2022 big-tech earnings are behind us - with only one winner. Apple reported inline results with weak guidance - but enough to send the stock 7% higher. The rest however were slaughtered on weak earnings and forward guidance. But it was the Facebook's "metacurse" which sent the stock reeling almost 30%... Amazon was also crushed on a poor Q4 outlook.
Bear Market Rally Approaching ResistanceMy best guess is the current 11% bear market rally could go a little further yet (e.g. maybe 5-6%). However we are now approaching a technical area of resistance. I also offer a new trade on TLT... on the thesis that yields will reverse course at some point in 2023
‘Fed Whisperer’ Spurs MarketThe rally is on... but how far can it go? I will share my thoughts. And whilst we're likely to see a short-term shift in sentiment... longer-term headwinds remain.
Short Term Rip… Then a Bigger DipAnother bear market rally or something else? My view is the former until proven otherwise. For me, we need to see yields and the dollar peak. But in the meantime - don't be surprised to see this market add 10%+ before pulling back.
