Great article! It sums up how much uncertainty and conflicting data there is at the moment. I'm decidedly less bearish than I was a few weeks ago but I'm still pretty far away from being bullish. I just don't have a clear bias right now because it feels like pure guesswork.
The key to risk rally remain: a bottom in ISM and Fed pivot. The former, despite the bad reading in Dec, has a couple of leading indicators that point to Dec being the low in the cycle. First, ERB (earnings revision balances) bottomed in Nov. Second, look at cyclical/defensive, meaningfully off lows. One might also mention a third that is your chartpack above. New Order / Inventories is not making a new low. On the Fed pivot, I still like the 1995 scenario or peak hawkishness has come and gone. That is when terminal in the forwards was above 5.25%, now backed off. I feel good about stability of risk trade, but am still wondering if it could just be a dull year, rangy, as you suggested, because am opening up to the idea that the decade long outperforance of US vs World might be ready to take a rest and who knows even reverse. In a no recession outlook wondering if credit might offer better IR than equities?
All great points. New orders to inventories will hinge on housing methinks. Expectation is dire for good reasons, we shall see. I just don't see how multiples expand and thus stocks need to be driven by earnings. I don't see that in the US. Thus I agree with you that EU and Asia cam do better this year and maybe this decade. To some that would seem to make no sense given the difficult spot Europe and China seem to be in, but I get the sense more fear in those mkts than the US
Great article! It sums up how much uncertainty and conflicting data there is at the moment. I'm decidedly less bearish than I was a few weeks ago but I'm still pretty far away from being bullish. I just don't have a clear bias right now because it feels like pure guesswork.
We are all data-dependent right now. The danger is seeing a pattern where none exists I think
The key to risk rally remain: a bottom in ISM and Fed pivot. The former, despite the bad reading in Dec, has a couple of leading indicators that point to Dec being the low in the cycle. First, ERB (earnings revision balances) bottomed in Nov. Second, look at cyclical/defensive, meaningfully off lows. One might also mention a third that is your chartpack above. New Order / Inventories is not making a new low. On the Fed pivot, I still like the 1995 scenario or peak hawkishness has come and gone. That is when terminal in the forwards was above 5.25%, now backed off. I feel good about stability of risk trade, but am still wondering if it could just be a dull year, rangy, as you suggested, because am opening up to the idea that the decade long outperforance of US vs World might be ready to take a rest and who knows even reverse. In a no recession outlook wondering if credit might offer better IR than equities?
All great points. New orders to inventories will hinge on housing methinks. Expectation is dire for good reasons, we shall see. I just don't see how multiples expand and thus stocks need to be driven by earnings. I don't see that in the US. Thus I agree with you that EU and Asia cam do better this year and maybe this decade. To some that would seem to make no sense given the difficult spot Europe and China seem to be in, but I get the sense more fear in those mkts than the US
Always great Richard