Down goes the Dow

GDP Now is hanging in there with above-trend real growth.

Sort of playing chicken here with stocks...will high real GDP growth provide EPS growth that will outweigh discounted cash flows de-rating of stocks?

I have no idea. Last week I was on team stocks. This week I'm on team certificate of deposit.

Latest estimate: 2.6 percent — March 8, 2023

Good question. But isn't the market moves also factoring in how the Fed will react to news of the above-trend real growth (which appears to persist regardless of what the Fed has been doing with rates)? Powell's last round of comments indicate he's more hawkish than many had hoped, and raising rates, and keeping them high for longer, has its own detrimental impacts on stocks going up. It seems that this is what the market was reacting to yesterday (the drop).

yeah but it's complicated by the fact that what we are seeing now is influenced mainly by what the fed did 6-9 months ago. For ex construction hiring is now starting slow, which tends to happen a few months after rates start rising.

So the Fed has to adjust for the lag of everything they do...what they do now will not affect the economy until the end of 2023. it's an impossible job.

But yeah the stock market wants slower growth, definitely. But the stock market is an emotional teenager, rocking back and forth depending on what it hears that day in the hall. Fact is, we've been in a trading range for 10 months. The rest is noise. So far.

I'm just looking forward to when the 5% yield on bonds actually provides 5% total return. All these dividends are being eaten up by falling NAV in the funds.

Yeah, I cut my losses on one of those funds 3 weeks ago, for that very same reason. the fund was SCHD Schwab Dividend Equity ETF.

Kind of interesting, though in that what the Fed does now has a lag factor, but the market looks ahead, too, so a focus on the end on the last quarter of this year and beyond is what is in the balance in both regards.

SP500 testing the 200 day again.

sounds like we're back on stagflation watch...with the future looking like on in which inflation hangs tough and the economy shrinks. .

But in reality inflation continues to fall by most measures and the economy is growing at a decent 2-3% rate.

But cracks are certainly appearing. Construction hiring is a canary in thecoal mine and it is falling like a rock, for example.

Regarding construction hiring, it may have a regional bias, but in my area, I am hearing ongoing stories about how hard it is for contractors to find workers, and this is as recent as last week.

Even though the number of unfilled job openings declined, it is still there, and it used to be too high quite recently. Definitely something to be watching nonetheless.

Interesting read on housing's labor numbers, and one inference they draw:

"Despite the weakening that will occur in 2023, the housing market remains underbuilt and requires additional labor, lots and lumber and building materials to add inventory. Hiring in the construction sector increased to a 5% rate in January. The post-virus peak rate of hiring occurred in May 2020 (10.4%) as a post-covid rebound took hold in home building and remodeling."

link:

eyeonhousing.org

Significant Drop for Construction Job Openings

Robert Dietz

The count of open, unfilled jobs for the overall economy declined slightly in January, falling to 10.8 million, after an 11.2 million reading in December, which was the highest level since July. The count of total job opening...

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yowch.

all the 'sell the market when it goes below the 200 day' people are dumping everything over the side en masse.

But meanwhile interest rates are falling, which is good.

Who cares?

I did not have 'bank failure' on my list of probably reasons for stock market drops.

Remember when everyone was looking for something to 'break' because interest rates moved up so fast? This is what is breaking - banks with large bond portfolios that they can't afford to hold to maturity. THey are having to sell now, at giant losses.

You buy treasuries you think you are being prudent. Oops.

Have to think Silicon Valley Bank's collapse will give the Fed a reason to chill out. You broke something, guys and girls. the goal is not to break stuff...the goal is find the best balance between inflation and jobs.

Probably this is good for stocks, although it's mighty scary.

bond yields are cratering, bond prices soaring on this kind of thinking. Hard to see the fed raising rates too much more now.

the drop in rates is insane today. 10 year down to 3.68% and falling like a rock.

Just wild stuff. The market is now saying the Fed will stop raising rates because any more of this and things will break.

Long bond fund NAVs are up 2.4% today. Wow. So many cross currents.

Anti-mimesis ?

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Small caps down 8% in something like 4 days. Good lawd.

Year to Date

Peloton +48%

TSLA +41

BTC +22

ARKK +15

Tech +9

Comms sector +9

Cons Disc +7

Clean energy +6

Long term bonds +5

Retail +4

Non-US develped +4

Corp Bonds +2

ST Junk +2

Inter bonds +2

Gold +2

Global 60/40 +2

TIPS +2

Junk +1

ST Corps +1

INdustrials sector +1

Materials +1

Treas +1

Sm Caps +1

SP500 +1

Emerging ex china +1

ST TIPS 0

Emerging 0

St Bonds 0

Hussman -1

COWZ -1

REITs -2

Commodities -4

Financials -4

Value -4

China -5

Schwab Divs -5

Consumer Staples -5

Energy -6

GME -7

Healthcare -9

Utils -9

Weed -13

SARK -17

Well. Geez.

In the end, global 60/40 is doing pretty well: +2%. Which is reassuring. That's how this is supposed to work. Bonds having such a good performance this week when stocks took a dive was very very welcome.

Markets have reversed from 2022...speculative tech has been the star this year and value has been the dog. Backwards from 2022.

Overseas continues to outperform the US. That's been a trend for a while. Everyone is underweight overseas stocks. Probably we all need to take a shovel and a sledgehammer and start building overseas names:

1 year:

USA -6%

Rest of world: -3%

Bonds have been pretty good this year. Finally getting a little traction. Bonds could be real heroes...a 4-5% coupon has to start working at some point. That mixed into a 60/40 portfolio could do some big things this year.

Overall, if 60/40 continues to work that will restore confidence in the markets. That's what I'm watching carefully, along with the battle betwixt tech and value.

love this: