S&P 500 no longer fearful above 200D as our “unpopular opinion” of inflation undershoot now looking to be central case. Technology/FAANG arguably best upside 1H2023 story.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am The S&P 500 is no longer “fearful” above the 200D Friday (1/27/2023) is an important comeuppance day with two key pieces of incoming economic data: Core PCE inflation (Dec) and U Mich …

A Fed “pause” in spring is pregnant pause and a pretext for a substantial easing of financial conditions. Supports why stocks could rise 20%-25% in 2023.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– SKIP TUE EVE/WED AM –> Traveling– SKIP WED– Thu eve / Fri am More than a few of our clients have told us that “falling inflation” is consensus and therefore priced into equities and these same clients tend to lean bearish as they view …

Downturn in PPI portends continued leg down in CPI. Of 11 sectors, 4 have solid EBIT correlation to PPI (commodities, utes). Least impacted are Technology, Discretionary, Comm Services and Financials.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule:– Sun eve / Mon am– SKIP MON– Tue eve / Wed am– Wed eve / Thu am– SKIP THU <– Due to traveling, we are sending out the note 1 day earlier– SKIP FRI Our latest “Inflation Dashboard” has been updated and is attached. Since the S&P 500 intraday low of 3,491 on …

Inflation is having its “Volcker moment” as 34% of CPI (by weight) in deflation, the same point in Oct ’82. As for “cash is a great alternative,” S&P 500 in 10 days exceeds 4% return of cash, “cash”-ites have to wait another 355 days to match the return of stocks.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am MACRO CATALYST WATCH: Wednesday 8:30am ET: Dec PPI (Producers Price Index) Core Street +0.1% MoM (was +0.4% last month) PPI Core (ex-food and ex-Energy) should show same type of continual improvement seen …

The “big news” in December CPI is 59% of components are now in deflation, a leap of 800bp in a single month (50-yr avg 50%). Reason to view this as repeatable low CPIs = easing FCI = falling VIX = rising stocks.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – SKIP SUN EVE / MON AM <– MLK Day – SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am Our latest “Inflation Dashboard” has been updated and is attached. CATALYST WATCH: FRIDAY U Mich Inflation 1-yr is reported 1/13 at 10am ET we expect inflation expectations …

“Rule of 1st 5 days” implies +26% gain 2023 (7 of 7 times). Dec CPI (1/12) could persuade markets it is less costly for Fed to change narrative than drive US into recession = financial conditions ease = upside stocks.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – SKIP SUN EVE / MON AM <– MLK Day – SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am With S&P 500 up already >2% in 2023, cash yielding 4% doesn’t seem such a good alternative With the first 6 trading days of 2023 behind us, …

Investors worry Fed playing “whack-a-mole” with equities, but if inflation tanks (with wages slowing), FCIs will ease. First 4 days +1.4% is strong 2023 omen implies +23% gain.

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am Investors worry Fed playing “whack-a-mole” with stock prices, but if inflation tanks (with wages slowing), FCIs will ease… Over the weekend, I had a few conversations with clients and one of them …

The “maths” show probability of 2023 seeing >20% far higher than expected (53%). VIX key for 2023 returns, not EPS growth and 3 catalysts likely to make “opportunity” less “crisis”

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am Because of bludgeoning in 2022, most investors expect stocks to be “dead money” in 2023… It would not entirely surprise anyone to say that most investors expect equity markets to “churn” in …

If Fed allows financial conditions (FCI) to ease, stocks could post double-digit gains in 2023…FCI matters more than Fed funds. Industrials, Discretionary, and Technology most levered to easing of FCIs

in FLASH, Macro Strategy

We publish on a 3-day a week schedule: – Sun eve / Mon am– SKIP MON– Tue eve / Wed am– SKIP WED– Thu eve / Fri am Next few weeks, incoming data might prompt Fed to soften rate outlook (in a good way) As markets look ahead to 2023, putting the awful 2022 behind, the plurality of investors are …