MS’s Mike Wilson blames persistent fiscal spending for why his stock call was wrong this year. “Fiscal policy has allowed the economy to grow faster than forecast, giving rise to the consensus view that the risk of a recession has faded considerably.”
Earnings Scorecard: For Q2 2023 (with 84% of S&P 500 companies reporting actual results), 79% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise.
Same FactSet Report:
Companies in the S&P 500 are on pace to collectively report a 5.2% decline in earnings, their worst performance since 2020. Revenue is on track to rise 0.6% from a year ago: FactSet. https://t.co/qKQQqcnvpd
basically agreed that when oil was at $70 or below the government should have bought a lot.
But
The trick is that you can't buy just any old oil for the SPR - apparently it has to have certain characteristics and be in the right place at the right time. Not trading paper here...it's actual petroleum. Maybe these were problems when oil was cheaper. I don't know.
Here's a set of predictions from 8/2022 that is almost half correct. Pretty good, esp from an academic economist.
It's from 8/2022 and mostly his prediction for the rest of 2022, but also reaches out to now.
Prediction - result:
Quick fall in inflation - correct
'nowhere near 2%" - incorrect
Economic slowdown - incorrect
Higher unemployement - incorrect
No recession (probably) - correct
Inflation sticking around 3% - correct
Debate about whether to stop choking the economy when inflation got to 3% - correct. That's where we are today. How many jobs should we kill off in order to get from 3% to 2% inflation.
1. I thought it useful to gather my thoughts and predictions for the US economy for the rest of the year. The usual caveat applies: there is a lot of uncertainty around them, but these are my best guesses. 1/9
I just call 'em as I see 'em, but my takeaway is this - the big seven tech flip flop. While Apple was doing great, Amazon and Google and Microsoft would often be doing nothing or even dropping a percent or two. But wait a few days and it's the exact opposite. While it's tempting to give up on one or the other, over even a short time span they all keep grinding higher.
If one were smart, it seems to me, the tactic would be to buy the dips on the ones that start lagging.
Igy - October, November and December are typically really good months for the stock market. Are you advising your clients to go heavy in on equities around this time?
Here's a classic doomster terrible prediction from a year ago. This guy said that a wage-price spiral had begun and the Fed needed to engineer a big nasty recession to slow inflation. And if we didn't have the recession we'd have even more inflation.
Instead, wages have continued to rise, but inflation has fallen like a stone to around 3-4%. 165k followers.
Ben Hunt @EpsilonTheory Every US company saw the jobs report today and licked their chops. Carte blanche to raise prices as much as they like. This is what an embedded wage/price spiral looks like, and it’s why the Fed must engineer a horrible recession to wring it out. Or they won’t, which is worse. 3:24 AM · Aug 6, 2022
Every US company saw the jobs report today and licked their chops. Carte blanche to raise prices as much as they like. This is what an embedded wage/price spiral looks like, and it’s why the Fed must engineer a horrible recession to wring it out.
I know you use GAAP so apples to oranges a bit, but still. Earnings are ramping.
David Cervantes liked Conor Sen @conorsen S&P 500 forward 1-year earnings estimates back near an all-time high at $235. At pre-market prices that’d put stocks at 19x forward earnings:
Igy - October, November and December are typically really good months for the stock market. Are you advising your clients to go heavy in on equities around this time?
I know you use GAAP so apples to oranges a bit, but still. Earnings are ramping.
David Cervantes liked Conor Sen @conorsen S&P 500 forward 1-year earnings estimates back near an all-time high at $235. At pre-market prices that’d put stocks at 19x forward earnings:
$235 seems a little optimistic for Forward EPS. GAAP previous 52 weeks estimate at $178. I have to admit the level of Government spending exceeded by far anything I could imagine. So anything is possible. Now is that a good thing short or long term for the markets? I think not, so retaining a short position, which I am now positive on, about up 5%. Equalizing position percentage though on market drop, moving that to money market.
the US economy is accelerating like mad. The giant sucking sound is capital from all over the world seeking American assets.
Kudos to who is old enough to remember that reference!
Latest estimate: 4.1 percent -- August 08, 2023
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 4.1 percent on August 8, up from 3.9 percent on August 1.
S&P 500 profit margins have fallen to the post-1990 trend. Here's the rub though: margins tend to overshoot on the downside during periods of margin compression, and consensus expects margins to expand back to the highs of 1-2 years ago. pic.twitter.com/lNIxBBm20c