Can the stock market finally overcome bad news? Imagine if Fed Chair Jerome Powell pivots further to the hawkish, dark side and says that he cannot guarantee that the Fed’s monetary tightening won’t cause a recession.
Over the past year, inflation has been having a positive impact on analysts’ consensus forecasts for earnings in 2022 and 2023 but…
The Buffett Ratio rose to new record highs at the end of last year. In the past, Warren Buffett has opined that the stock market was overvalued when the ratio of the market capitalization of US equites to nominal GDP rose to around 2.0 or higher.
The S&P 500 is down 18.0% since it peaked at a record high on January 3. The current selloff is reminiscent of the 19.8% correction during the last three months of 2018 through Christmas Eve.
The Investors Intelligence Bull/Bear Ratio (BBR) fell further below 1.00, to 0.68, during the May 10 week.
The meltdown in forward P/Es continued yesterday, while forward earnings continued to scale new heights.
We concur with Fed Chair Powell that getting inflation back to Earth needn’t crash our strong, liquid economy. The Bond Vigilantes aren’t as far behind the inflation curve as the Fed:
Are we heading toward a P/E-led bear market even though earnings continue to grow?
The air continued to come out of stock valuation multiples this past week. It has mostly been coming out of the S&P 500 Growth index’s MegaCap-8—i.e., Alphabet, Amazon, Apple, Meta, Microsoft, Netflix, Nvidia, and Tesla. Consider the following:
Why is the 10-year Treasury bond yield only around 3.00% when the latest headline CPI and PCED inflation rates were 8.5% y/y and 6.6% y/y? Why would bond investors willingly lock in such a painful negative real return?
We are on the lookout for signs that inflation might be peaking. It’s hard to find any when we look at the price and wage data on a y/y basis. However, there are hopeful signs in numerous 3-month percent changes at annual rates. Consider the following:
“Ugly” is the only way to describe today’s stock market selloff. The S&P 500 is down 13.5% ytd since it set a record high on January 3. So it’s still in correction territory. It dropped 3.6% today, but that was after a 3.0% jump the day before.
