We are continuing our coverage of earnings season during these turbulent times. Last week, we highlighted the disconnect between earnings expectations and valuation (see Earnings Monitor: Reality bites). This week, we are seeing greater signs of stabilization, and hope for the future. Let's begin with the big picture. FactSet reported that the bottom-up consensus forward...
This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus, and the hope...
Now that we are slightly over halfway through Q1 earnings season, it would be useful to see what we have learned, and how market expectations have developed through this pandemic period. Let's begin with the big picture. FactSet reported that the bottom-up consensus forward 12-month estimate fell -1.9% last week, and -18.3% since downgrades began...
The San Francisco Fed recently created a Daily News Sentiment Index, which is derived from 16 major newspapers. In the space of a few weeks, market psychology has turned from "the market is going to retest the March lows" to "the Fed is supporting prices, valuation doesn't matter, the economy is recovering, - Buy". Regular...
FactSet reported last week that bottom-up aggregated earnings estimates have been skidding rapidly for both 2020 and 2021. Forward 12-month EPS estimates are falling even as stock prices rose. Do earnings matter anymore? Flying blind What is the market discounting? At this point, any estimates that analysts make are only...
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...
In the past few weeks, a number of investors and strategists have turned bullish. I would like to address the reasoning for the bull case for equities, and the risks to the reasoning. History shows that recessions are bull market killers, and bear markets do not resolve themselves this quickly without a prolonged period of...
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...
Stock prices raced upwards last week on the news that the COVID-19 outbreak is improving in New York and other parts of the US, and on the news that the Fed unveiled another $2.3 trillion bazooka of liquidity. Despite these positives, I am not convinced that this bear market has seen its lows yet. This...
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...
Last week's stock market rally appears to be based on the hopes of a V-shaped economic recovery, powered by the combination of all-in monetary stimulus, and fiscal stimulus, as evidenced by a $2 trillion bill passed in Congress. Street consensus is now a V-shaped rebound, with a trough in Q2. This Goldman Sachs forecast is...
There is little doubt that we are in a recession induced bear market. Goldman Sachs published their GDP forecast late last week of a V-shaped slowdown and recovery. For some context, New Deal democrat raised an important point about a framework for thinking about the recession by flipping the well-known "flatten the curve" chart upside down:...
There is little question that the stock market is wildly oversold. My intermediate term bottom spotting model has been flashing a buy signal for over a week. This signal is based on the combination of an oversold signal on the Zweig Breadth Thrust Indicators, and the NYSE McClellan Summation Index (NYSI) turning negative. In the...
In my last post (see 2020 bounce = 1987, or 1929), I had been searching for a template for the current bear market. I had suggested in the past that the roots of this bear has thematic similarities to 2008 (see A Lehman Crisis of a different sort). Today, health authorities are urging the use...
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...
In the past week, I have had several discussions with investors about my recession call (see OK, I'm calling it). Since the publication of that note, Bloomberg Economics' US recession probability estimate spiked recently up to 55%. The odds of a 2020 recession at betting sites are even higher. To reiterate, I would like to...
While I may be jumping the gun on my model readings, I'm calling a recession. Remember when oil prices tanked in the second half of 2014? The economy experienced a shallow industrial recession in 2015. While history doesn't repeat but rhymes, the price war that erupted over the weekend between Russia and OPEC...
Is the bull on his last legs? It is starting to look that way. I alerted readers to an unconfirmed bullish monthly MACD buy signal in late July (see A (deceptive) long term buy signal). The buy signal was confirmed in late October by both the Wilshire 5000 and non-US markets (see Buy the breakout,...
Remember the Lehman Crisis? The failure of Lehman Brothers marked the start of the Great Financial Crisis that destabilized and almost brought down the global financial system. What we are seeing is a Lehman Crisis of a different sort. The Lehman Crisis of 2008 was characterized by financial institutions unwilling to lend to each other...
The covid-19 coronavirus outbreak is a human tragedy, just like Ebola, MERS, and SARS. For investors, it has an economic impact. Even before the outbreak, world merchandise trade volume had been falling. New data is likely to show that the outbreak disrupted global supply chains sufficiently to further depress global trade. The market consensus initially...
Our site uses cookies and other technologies so that we, and our partners, can remember you and tailor your user experience on our site. See our disclaimer page on our privacy policy, how we manage cookies, and how to opt out. Further use of this site will be considered consent.
