Earnings In Q2 Were Fantastic
Last week was the busiest week in earnings season. Most of the trends that we’ve been seeing continued. It is shaping up to be a great quarter. The details of the reports give us information about what to expect in the next few quarters. Forward earnings expectations are what will drive stocks, so it’s critical…
Moving On To Tax Reform
Healthcare Reform Failed The GOP’s healthcare reform ended up being a bust. It’s all about game theory. As I said, the House could decide to simply pass the “skinny bill” without doing a conference like many of the moderates and some of the conservatives wanted. For Paul Ryan and Mitch McConnell, it was a matter…
Q2 GDP Growth More Than Doubles Q1 The Speed
As expected, the annual GDP growth rate came in between the NY Fed and Atlanta Fed’s projection as it was 2.6%. This was above my expectation for 2.25% growth and slightly below the consensus estimate which was 2.8%. I don’t consider this to be a weak report just because of the slight miss as anything…
Stock Performance Follows Forward Earnings Estimates
Valuations & Earnings The chart below on the left is the exact depiction of the earnings cycle which I have been discussing. The key theme is easy year over year comparisons and the improvement coming from the energy sector. That will end in 2018 which is why I am bearish on stocks in 2018 (unless…
VIX Hits A Record Low
VIX With An 8 Handle The VIX seems to keep reaching unprecedented levels. I guess it’s fair to say this is expected because the short VIX trade has been very popular as traders feel it’s a way to mint free money. Personally, I think it’s better to sell some of your stocks instead of buying…
Fed To Start Unwind Of $10 Billion Per Month In September
The key takeaways from the FOMC statement on Wednesday were that rates weren’t raised, the Fed plans to unwind the balance sheet starting in September, and the Fed downgraded its inflation comments as it slowly acknowledges that inflation hasn’t been as strong as it had been claiming it was earlier in the year. It’s interesting…
270 Days Without A 5% Correction
Latest On Healthcare & Debt Ceiling The GOP barely passed the motion to proceed with debate on the healthcare bill as John McCain dramatically came back from illness to push it over the edge. There was a snarky hot mic take which ended up being useful as Senator Susan Collins and Senator Jack Reed expressed…
Will Central Bank Liquidity Dry Up In 2019?
Central Banks About To Break The Market I think that many investors who are saying the Fed’s balance sheet unwind will be a nothingburger are tired of the story and they think it’s overkill. They are also myopic in their thinking. The chart below shows that even though we have been talking about an unwind…
Healthcare Vote Tuesday
Draghi Won’t Taper? The bond market gives us a picture of what investors are expecting from policy makers. The chart below shows the bond spreads the riskier European countries are trading at compared to the German Bund. The spreads of these countries, formerly known as the PIGS, have been tightening in the past few months.…
Earnings Estimates For Q3 Drop Further
This week will be the biggest earnings week of the year as 190 firms are reporting, including Facebook, Alphabet, and Amazon. Those three reports will shape the performance of the market for the next few months. If 2 or 3 miss estimates, the rally could be halted, especially in the Nasdaq which has had a…