Perspectives

No one should be popping champagne when they see Thursday’s GDP report. The good news is that it won’t be negative. The bad news is that even if it hits our estimate of 2.1% this is a far cry from the robust growth of the economic expansions in the 1980s and 1990s. The US is in desperate need of policies that raise the long-term growth of the US economy, policies that encourage more capital formation, better education, and making it easier to raise the next generation. In the meantime, we … View More

U.S. equities were higher last week (S&P 500 +2.4%) more than erasing the prior week’s declines. The small-cap R2000 increased 3.6%. The main focus for the week was the June CPI report, which came in softer than consensus on both the headline and core readings. Best sectors were communication services (+3.4%) and consumer discretionary (+3.3%); worst sectors were energy (+0.6%) and consumer staples (+1.2%).   Source: Bob Doll, Crossmark Investments   Chart reflects price changes,… View More

Expectations for 2024 S&P 500 operating earnings have fallen from $253 at the start of the year to $246 today. While this is only a modest decline, it means that the S&P 500’s entire +14.6% price gain year-to-date has been due to multiple expansion. This may have been easier to understand when 10-year Treasury yields plumbed their 2023 depths of roughly 3.3% in early April, but it is harder to justify now as the 10-year broke decidedly above 4% last week. A combination of slower expect… View More

U.S. equities fell last week (S&P 500 -1.4%) as the S&P 500 broke a five-week streak and the NASDAQ an eight-week streak of gains. Higher-for-longer Fed policy remains a key piece of the bearish narrative. Best sectors were healthcare (+0.2%) and consumer discretionary (-0.0%); worst sectors were real estate (-4.0%) and energy (-3.5%).   Source: Bob Doll Crossmark Investments   Chart reflects price changes, not total return. Because it does not include dividends or splits, it s… View More

Lately, it’s been easy to see the optimism. As of the Friday close, the S&P 500 is up 15% so far this year (not including dividends) and up 23% (again, without dividends) versus the lowest bear-market close back in October. Some investors attribute this to the Federal Reserve being very close to finished with the series of rate hikes that started back in March 2022. But that doesn’t really make sense. If investors thought the Fed were finished (or nearly finished) because it had tighten… View More

If the Federal Reserve were paying close attention to the money supply, it would know that monetary policy is now tight. Through April, the narrow M1 measure of money has fallen for thirteen straight months. The broader M2 measure of money has dropped nine months in a row and is down 4.6% from a year ago. M3, a broader measure of money that includes large CDs, is down 4.1% from the peak last July. Meanwhile, bank credit at commercial banks as well as their commercial and industrial loans are bot… View More

Historically, the movement in stock prices has had a stronger relationship with inflation and long-term interest rates than it has with the unemployment rate. Still, we are left with a simple question – can a new and durable economic cycle and market cycle begin when the economy is already starting at full employment? As the table below indicates, forward stock returns are better coming off peak unemployment rates rather than troughs. Still, forward returns off trough unemployment can be dece… View More

U.S. equities were mixed last week, with the S&P 500 slightly higher (+0.3%) though NASDAQ posted its second straight week up at least 2.5%, largely driven by AI optimism. Analysts have continued to warn of narrow breadth. Best sectors were technology (+5.1%) and communication services (+1.2%); worst sectors were consumer staples (-3.2%) and materials (-3.1%). The chart below shows just how narrow the market performance has been this year. Notice the sectors that performed the worst last ye… View More

Stocks were higher last week (S&P 500 +1.6%), lead once again by the tech-heavy NASDAQ (+3.0%). YTD NASDAQ is +20.9%, S&P 500 +9.7% and DJIA +0.8%. The S&P 500 broke above 4200 for the first time since last August. The news backdrop featured seemingly positive progress on the debt ceiling negotiations. Best sectors were technology (+4.2%) and communication services (+3.1%); worst sectors were utilities (-4.4%) and real estate (-2.4%). While we are reasonably certain that inflation h… View More

What follows are some simple answers to the questions Strategas research is receiving most frequently from their clients these days. We are happy to hop on a call to discuss them in greater detail should you have further questions about our answers.   What would make you change your mind? There are two major themes underlying our bearishness on both the economy and the markets: 1) the bill is finally coming due for more than 12 years of financial repression and fiscal profligacy; and 2) g… View More