Like the myth of the “Ramblin’ Man”, whose rough-and-tumble, on-the-road lifestyle was described by the Allman Brothers Band in 1973, most S&P 500 companies and management teams continue to search for the good times while navigating a bumpy road and challenging environment for profit growth.
This week, Minneapolis Fed President Neel Kashkari published an essay titled “Policy Has Tightened a Lot. How Tight Is It?”, but we think a great alternative title would be “We Didn’t Stop the Fire”, the inflation fire that is.
For much of the past two years, the bond market has been expecting a much easier policy path than what the Fed has signaled and executed. Time and time again, the bond market has front run the Fed, expecting a shift to easier policy, but the Fed has not delivered.
Though strong rallies in broad equity market indices to start 2024 are hardly wince-inducing like Journey’s music video, under the surface, we have continued to see stark divergence between market leaders and laggards, with a notable continuation of 2023’s leadership profile to start 2024. We think this performance is due to earnings revisions going separate ways.
Earlier this week we released our 2024 macro and market outlook titled “Stranger in a Strange Landing”. It argues that instead of having a Hard, Soft, or No Landing, we could have a “Strange Landing” in 2024.
Kansas’ 1976 signature song “Carry on My Wayward Son” alluding to perseverance and uncertainty, is a fitting analogy for the upcoming earnings season, which kicked off yesterday with reports from economic bellwethers J.P. Morgan, Wells Fargo and United Healthcare.
We are watching closely (or pulling out our Libra Scales of Justice) for indications that Value’s early outperformance in 2024 could be setting up for a triple top in Growth vs. Value, meaning a period where Growth underperforms Value.
Equity markets have been acting invincible (save for Wednesday of this week). With the tailwinds of a friendly Fed and resilient growth data, equities have been in full melt-up mode as investors chase to increase exposure into year end.
As current Federal Reserve Chairman Powell was “Livin’ in the 90’s” this week, we dust off our debut Third Eye Blind CD and ask “how’s it going to be?” for markets and the economy now that the tightening cycle is (or at least is expected to be) over.
Wasn’t that nice? A whole week without Fed speak! The board is in its “quiet period” in the lead up to next week’s meeting of the Federal Open Market Committee.