The Bull Case

While our work sees a global macro setup fraught with risk-asset risk, today I want to consider what I see as some key points in the present bullish narrative; the narrative that says this is, in fact, an ideal moment to be adding to risk assets (read stocks).

"An Expectations Problem" (video)

Dear Clients, this week's video commentary is an important one to take in when you have a few minutes... 😎

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Untenably Priced

Latest log entries.

But first a quote:

“The only way to make money in the markets is to be patient, disciplined and informed. You have to have the confidence to make decisions based on sound analysis and rational thought.” --David Shaw

8/27/2024

While I believe we're less-sanguine on the economy right here than is Bob Elliott, I find his analysis to be spot on... I.e., the conditions priced into US equities are virtually untenable in the foreseeable future.

@BobEUnlimited

US stocks don't have an earnings problem, they have an expectations problem. With expectations of 3% real gdp in 2H24, earnings growth to reach 16% y/y by end of '25, and an AI boom ahead driving 21x multiples, such lofty expectations are a setup for disappointment. 

The, Maybe (we'll see), Quote of the Year -- Or, at a minimum, perhaps another "warning sign"

In this week's written post, I said the following with regard to professional traders:

"...despite the present ever-rising risk, today’s trader believes that, in pure self-interest/preservation, they must continue to rock to the infamous 2007 tune played by ex-Citi  CEO Chuck Prince:

“... as long as the music’s playing you gotta get up and dance.”"

So, I'm sitting here this morning listening to the latest Market Huddle podcast, and I hear this week's guest, Louis-Vincent Gave, say the following:

Jobs Revision Says Something, Powell Doesn't Disappoint, Extreme Myopia, yada yada (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

"Underpinned By Emotion" -- And -- Signs

The latest action in equities has me thinking a lot about how to properly characterize the aggregate personality of the market at this moment.

I’m thinking about the institutional trader, the hedge fund manager, yada yada, and how they live and die by their running P&L… Those who are experienced, thoughtful and objective know that we are late-cycle, that valuations are extended, and that a potentially consequential repricing of stocks is likely in the not-too-distant offing… Nevertheless, we’re not there yet, the dips continue to get bought, and – as evidenced by the Bank of Japan’s jawboning reaction to recent hemorrhaging, and likely by this week’s Fed Jackson Hole meeting – the powers that wield policy have little stomach for downward volatility.

Economic, and Market, Risk Remains Elevated, Despite Wall Street's Insistence

Well, once again, we're having technical difficulties with our video software... Apparently our new "updated" version didn't correct the issue after all... We'll get with the vendor and be ready to go next week.

In the meantime, here are the visuals I had loaded up for this week, with some commentary:

Housing data say we’re not out of the woods, despite Wall Street's insistence.

Yesterday’s homebuilder sentiment reading (at 39 [under 50 = contraction]) was, let's say, not optimistic!

Plus: