Ironically, what the headlines suggest is ailing the market these past couple of weeks -- stubbornly high inflation -- is very likely to measurably abate over the coming months.
Partly from year-on-year base effects, but also from the likes of this morning's release of January's leading economic indicators (LEI).
For our purposes, we run the LEI relative to the CEI (coincident economic indicators)... Take a look (red shaded areas denote recession):
Now let's fold in inflation (CPI):
I mean, of course a weakening economy means lower inflation... Whether or not it takes it down to the Fed's target without recession remains to be seen... We think it's doubtful.
So, with inflation about to mount a serious decline over the coming months, stocks should be set to seriously rally, right?
Well, on the news, that wouldn't surprise me... However, there's another, bigger, issue within the above scenario!
It's this one I keep showing you:
That orange line is S&P 500 earnings... That one has me thinking like (push the play button):
Stay tuned... oh, and stay hedged!
Asian stocks got hammered overnight, with 14 of the 16 markets we track closed lower.
Europe is leaning red so far this morning, with 11 of the 19 bourses we follow trading down as I type.
US equity averages are down to start the session: Dow by 21 points (0.06%), SP500 down 0.70%, SP500 Equal Weight down 0.65%, Nasdaq 100 down 1.08%, Nasdaq Comp down 0.98%, Russell 2000 down 0.16%.
The VIX sits at 20.64, up 2.33%.
Oil futures are down 3.49%, gold's down 0.02%, silver's down 0.02%, copper futures are down 0.83% and the ag complex (DBA) is up 0.61%.
The 10-year treasury is up (yield down) and the dollar is up 0.23%.
Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), only 13 -- led by utilities stocks, ag futures, staples stocks, Nokia and healthcare stocks -- are in the green so far this morning. The losers being led lower by Albemarle, energy stocks, MP Materials, Dutch Bros and AMD.
“...like reading a map, print it out and look. But if you want to go in a direction, you don’t get to look at the whole map. When you say "I want to go from here to there," you don’t see the whole map. Take no direction, just look. Be choicelessly aware of this extraordinary map.” --J. Krishnamurti
Have a great day!
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