Not trying to be overly negative, but our job is to point out risks. When it comes to earnings there are plenty of series that look unusual. The decline in consumer confidence is disturbing, and since consumption makes up 68% of U.S. GDP, it plays an important role in earnings. https://x.com/FrancoisTrahan/status/1815392346168529003
I asked @jonathan_zucco to look at historical examples of deviations between earnings expectations and consumer confidence and there were not many. When they did occur, they were generally resolved with earnings following the consumer and not the other way around. https://x.com/FrancoisTrahan/status/1815449439982723474
and so this is why we ought to be concerned about Where We're At with the markets:
1. Equities are at elevated Overvaluation (by all measures)
2. The US Consumer is hurting and unemployment is rising
3. China won't be in the position to save the economy this time around
4. There are pockets of distress: US CRE, Japanese bonds (potential)
5. Political risk premium going higher -with dysfunctional geopolitics ramping up
6. There may be disinflation going on now but inflation is by no means dead and buried: rates are not returning to low levels in the absence of a major recession
7. Debts at all levels (Govt, corporate, individuals) are at record levels
AND It is Not That You Do Not Know This.
BUT like everyone else or most think, the markets have yet to truly implode, and we never know when, so it's always best to remain invested and not try to pre-empt anything.
YES that's what most fund managers would tell us, because their living depends on it.
The trouble is as the market inches its way lower, no one would second guess if it is a healthy correction or something more ominous as a train wreck in motion. It is only when mainstream news start the alarm bells that the common person starts to take notice and perhaps do something. The opportunity to sell into strength then is lost. But that was a conscious choice, you knew the symptoms were there but chose to ignore them not taking appropriate risk management.
