Is the U.S. economy headed into recession? The signs are all there. Even though a recession isn’t part of the Fed’s official forecast, Fed Chair Jerome Powell conceded during the May post-FOMC press conference that the Fed’s staff economists were calling for a mild recession. Carl Quintanilla of CNBC also reported that the overwhelming...
The main events in the coming week will be the interest rate decisions by Federal Reserve on Wednesday and the ECB on Thursday. Both are widely expected to raise rates. However, market expectations for the trajectory of the U.S. Fed Funds rate is a 25-basis-point hike at the May meeting, a pause, and rate cuts...
As the S&P 500 stalls at overhead resistance while exhibiting negative divergences, here are some reasons why you shouldn’t be overly bullish or bearish on U.S. equities. The Bear Case The bear case for stocks is based mainly on macro and fundamental conditions. A recession is on the horizon in H2 2023,...
The International Monetary Fund published its latest World Economic Outlook. It cut its global GDP growth estimate by 0.1% from 2.9% in January to 2.8%. More ominously, it issued a warning about a growing risk of recession in the advanced economies from financial instability risk from bank failures: “A hard landing — particularly for advanced...
An unusual anomaly arose during the latest banking crisis when a long-standing historical relationship broke apart. When bank stocks skidded in response to the problems that first appeared at Silicon Valley Bank, the 2-year Treasury yield fell dramatically, indicating a rush for the safety of Treasury assets. What was unusual this time was the weakness...
It was the best of times. It was the worst of times. The S&P 500 (SPX) remains in a well-defined uptrend, but the NASDAQ 100 (NDX), which represents large-cap growth, violated an uptrend that stretches back to the GFC. The relative performance of the NASDAQ 100 to the S&P 500 shows a similar trend break...
Mid-week market update: In case you missed it, the S&P 500 experienced a "golden cross" this week, when the 50 dma rose above the 200 dma. This is generally regarded as a bullish development among the technical analysis crowd as an indication that the price trend has turned upward. How should traders and...
As investors look ahead to the FOMC decision on February 1, the market is expecting two consecutive quarter-point rate hikes, followed by a plateau, and a rate cut in late 2023. The rate hike path and subsequent pause are consistent with the Fed's communication policy. Already, the Bank of Canada raised rates by...
Mid-week market update: As we enter Q4 earnings season, the macro backdrop looks grim. The Economic Surprise Index, which measures whether economic releases are beating or missing expectations, is weakening. Weak fundamentals From a bottom-up perspective, FactSet reported that the market entered Q4 earnings season with a trend of falling net margins....
The stock market began 2023 with a rally based on the "green shoots" narrative of a Fed pivot and optimism about the effects of China reopening its economy. Since then, the S&P 500 rose to test resistance as defined by its falling trend line and pulled back. Similarly, the equal-weighted S&P 500, the mid-cap S&P...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend...
Mid-week market update: The bulls are nervously getting ready for a party. Jeff Hirsch of Almanac Trader pointed out that two of his January indicators are positive. When all three are positive, the rest of the year tends to lean bullish. This year, the market has eked out a 0.8% gain for its Santa...
IMF Managing Director Kristalina Georgieva recently said in a CBS Face the Nation interview that the IMF expects "one third of the world economy to be in recession". She went on to outline the differing outlooks for the three major trading blocs in the world, the US, EU, and China, plus emerging market economies. For most...
Fed Chair Jerome Powell made it clear at the post-FOMC press conference. The Federal Reserve is nowhere close to ending its campaign of rate increases. While last two CPI reports show "a welcome reduction in the monthly pace of price increases...It will take substantially more evidence to have confidence that inflation is on a sustained downward path."...
It's time to conduct one of my periodic market leadership reviews. The review will be done through different viewpoints, starting from the top from an asset lens, a global equity lens, and finally through a factor, or style, lens. The primary tool for my analysis is the Relative Rotation Graph, or RRG chart, which...
I highlighted a widening gulf between the technical and macro outlook in August (see "Price leads fundamentals", or "Don't fight the Fed"?). At the time, the technical indicators were wildly bullish because of strong price momentum, while the macro outlook was cautious. The macro view eventually won out. A similar divide may be appearing...
The performance of balanced funds has become especially challenging in 2022. In most recessionary equity bear markets, falling stock prices were offset by rising bond prices or falling bond yields. The fixed income component of a balanced fund portfolio has usually acted as a counterweight to equities. Not so in 2022. You would...
In the wake of the November FOMC meeting, Fed Chair Jerome Powell summarized Fed policy very clearly with two statements: "We will stay the course until the job is done". He added, "It is very premature to think about pausing (rate hikes)". It was a hawkish message, though Fed Funds expectations were largely unchanged...
Ahead, of the upcoming FOMC, meeting, what is the market discounting? I conduct a factor and sector review for some answers. Starting with a multi-cap review of value and growth, value stocks have been outperforming growth stocks within large caps since early August, but this has not been confirmed by mid and small caps. The...
In light of the dismal performance in the first nine months of a 60/40 portfolio in 2022, it's time to ask, "What's changed and what adjustments should investors make to their portfolios?" The answer is inflation, and it's a game changer. The correlation between stocks and bond increasingly rise as inflation rises. In...
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