Stocks-Q2 Ends with a Bang! More to Come? OR, Reality Bites-Earnings-Rates-Recession-Read It!
July 1 2023 Option Professor OPINIONS & OBSERVATIONS
Time for Bullish (and how could you not at almost 1000! S& P points ABOVE the lows of October 2022!) Of course, we know this is what HAS happened and the key is where is the puck going. The talk of all these short is amusing as I don’t think Musk has enough money to stay short this market:): JULY is a huge month in that expectations are for CPI to retreat due to last June’s 2022 month being dropped replace by a low number. PCE CORE is at 4.6% so we have cut 50% off the top rate of 9%. With equity prices up, housing higher, jobs plentiful, will the next 2.6% inflation drop be easy? They say the cure for higher prices IS higher prices (people refuse to purchase/change spending habits). Firsthand, we may have witnessed it at Home Depot where we have pictured up major appliances 33% OFF! This may hit the last inflation engines (first it was Covid demand, then supply chain issues, and finally price hikes).
We suggested TECH (Growth) OVER Value back in Q4 2022 and it still is the overweight despite concerns. Friday, we got tech like AAPL MSFT AMZN META NVDA continue to be fed BUT small & mid caps are adding to recent gains and expanding breadth. Global stocks sin Mexico climbed, cloud and cyber security, travel/gaming, ev’s autos, Gold Silver Copper, Health Care, Financials, & other sectors all gained.
Mid-July, we get CPI and the start of EARNINGS season (banks). REVISIONS have been to the upside BUT NKE & WBA are 2 examples that if you miss you will get punished. EARNINGS are expected to drop 6%+ but the Q1 EARNINGHS were supposed to drop and came in stronger than expected. Are China EXPORTS slowing telling us something? Economic slowdowns and inflation in Europe? China/Japan currencies hit?
The 2nd half will be FAR different than the 1st half of 2023 for reasons ranging from lag effects of Fed Policy, the AI boom will sober up, valuations are ridiculous, summer will end, and Q4 will pay the price.
Having said that, we don’t fight the tape DESPITE the fact that the tape is fighting the Fed. We said that 1 year Treasuries (real rates as well) MUST get ABOVE the CORE inflation rate and stay there for a lengthy period to bring inflation down AND we are not done with that mission. When we see price proof-we go!
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