Perspectives

Philip Lane, the ECB’s chief economist, said last week that "we have a lot of work to do (to raise inflation) … This narrative of a new inflation environment, I just put very little weight on it" (Reuters). Global central bankers are sticking by their models. But this is likely to get more difficult as the year progresses. The duration & composition of inflation (rather than the number we pop up to) is important for monetary policymakers. But different data may matter for investors (espe… View More

With 90% Reported Earnings Growth Still Greater Than 50% For 1Q With 90% of S&P 500 companies reporting earnings thus far, earning growth for 1Q is still expected to be greater than 50%, while revenue growth is near 13%. We do not anticipate any material changes this upcoming week and expect most investors to begin thinking about 2Q and beyond. 2Q Earnings Growth Expected To Be Just As Strong Currently, the second-quarter earnings season is expected to see earnings growth just as strong a… View More

The big headline is that year-over-year inflation came in at +4.2%. What the headline leaves out is that inflation hit a period low in May 2020, meaning much of the inflation data we are seeing now is simply “catching up” to where things would have been if we had never had the 2020 recession. It also fails to mention that inflation almost ALWAYS runs higher during the recovery from a recessionary period. Summary: More often than not, stocks appreciate in an inflationary environment Cash l… View More

We remain focused on the economy’s progression through the traditional start-of-cycle sequence, that is: a catalyst – in this case, the broad distribution of the vaccine and the re-opening of the economy – leads, in succession, to an increase in activity, demand, output, revenue, investment, and profits. By our lights, the durability of the expansion is largely defined by the self-reinforcing increase in corporate investment fueled by the post-contraction repair of the revenue stack. The s… View More

It’s been more than a year since the Technology sector has made any relative progress vs. the S&P, it’s the longest stretch of indifference since roughly 2013. Granted the bar has been high given the broader market’s run, but nevertheless, it continues to mark a noted shift in tone, made all the more significant given a static Fed and some great earnings last week. Last May over 70% of Technology stocks were in a relative uptrend vs. the S&P (easy to find a leader), while today’s… View More

In a gallop poll out today: Current Economy Evaluations Improved, but Have Been Better During Pandemic In the new survey, 28% describe current economic conditions as either excellent or good, while 26% say they are poor. Last month, 23% rated current conditions as excellent or good and 31% as poor. The April ratings are not the best they have been for this aspect of the index during the pandemic. In November, positive evaluations of current economic conditions exceeded negative ones by 13 per… View More

Parts of the global economy continue to face new lockdowns because the pandemic is not over. But the endgame still appears to be the availability of effective medical vaccines, which will allow economic re-openings. The U.S. is providing further evidence. Recent U.S. economic data has been strong overall. Retail sales surged +9.8% m/m in March, initial jobless claims plunged to 576,000 last week (the lowest since the pandemic hit last year). The NY Fed manufacturing index rose to 26.3 in April a… View More

One of our research providers developed their “L-E-S” model about 20 years ago to keep track of what we believe are the most basic building blocks of market health – Liquidity, Earnings, and Sentiment. There is currently a yawning gap between the recent performance of the market and what their model suggests its performance will be over the next two years. Naturally, it is extremely risky to be short risk assets at all when M2 is growing at 27%. Still, one could argue that it will be diffi… View More

The next several months are likely to test the resolve of the Federal Reserve to maintain its “all in” support. U.S. policymakers continue to target employment. There’s still some labor market slack, but the U.S. economy is picking up quickly now. U.S. mobility measures have already been increasing (ahead of herd immunity). This trajectory remains consistent with timely industry data (eg, TSA travel statistics, restaurant reservations). The Conference Board measure of U.S. consumer confid… View More

2020 will be a year we will all remember. Not only was it the year the global economy was abruptly shut down for the Covid-19 Pandemic, but it was also the year we saw the biggest (by a very large margin) fiscal and monetary stimulus ever. So far, it looks like 2021 is another year we will never forget. The fiscal and monetary stimulus numbers in 2020 are bigger than they were in 2021, and the proposed tax increase to pay for it all will be the biggest tax increase since 1968. On March 31, 2021… View More