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re: Will the S&P finish the year
Posted on 11/15/23 at 10:30 am to Bard
Posted on 11/15/23 at 10:30 am to Bard
Half way through the fourth quarter. Is everyone still sticking with their predictions from seven weeks ago? I still think the fourth quarter rally puts us significantly above where we started the year.
2
Posted on 11/16/23 at 6:24 am to go ta hell ole miss
quote:Yeah, I'm still backing the bull.
I still think the fourth quarter rally puts us significantly above where we started the year.
There is no recession (excluding Q1 and Q2 of 2022). Even in those recessionary quarters, unemployment was low and people were flush with cash so they pushed through.
Earnings are strong and hopes are high. S&P 500 companies out-performed analysts expectations in Q3. Analysts are predicting Q1 2024 earnings growth of 6.7% and Q2 2024 growth of 10.5%. The point is that investors are bullish in the near term.
Upward momentum is strong. The S&P 500 recently rose over eight consecutive sessions. Every two-year period following eight-day win streaks since 1950 has delivered positive returns, averaging 25.7%. I don't necessarily hang my hat on this, but if we're reading tea leaves...
Interest rates have probably peaked. The 10-year Treasury yield of 4.5% to 5% is historically not damaging to the economy, yet heavy enough to impact inflation as recent data has shown. The CME FedWatch Tool says there's an 100% probability it will stand pat again at its next meeting on December 13.
Wall Street is in a good mood.
Posted on 11/16/23 at 12:15 pm to go ta hell ole miss
quote:Credit is very strong - hard to see any reason spreads would widen significantly.
Half way through the fourth quarter. Is everyone still sticking with their predictions from seven weeks ago? I still think the fourth quarter rally puts us significantly above where we started the year.
We've also already been dealing with more "unemployment" than is being reported. A few examples in real estate: commercial brokers that are technically still employed, but have seen transaction volumes plummet. They've already been making way less for at least a year, but still count as employed. However, most of them are long at least one house, so their wealth has still held up. Another example is most retail real estate brokers - many are technically 1099 workers, so they wouldn't really show up in the stats either.
The point is, we've already been working some pain through the system that we're likely discounting in overly bearish commentary.
Also, a lot of institutional investors - especially in Europe - have been on the sidelines for the past bit. In 2024, they will start allocating again pretty strongly.
I have now almost fully switched my view from "a recession is very likely and also like to be pretty severe" to "I can see a little bit of downturn, but do not see a big distressed cycle coming".
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