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.
Annual outlook season has begun in earnest on Wall Street. Strategists from around the Street have started publishing their predictions for the S&P 500 next year, and though there are ample critiques about using single point estimates for markets , it is helpful to understand the logic and drivers behind these different takes on the market.
As we have written previously, the risk/reward for bonds has become more balanced for investors who can tolerate short-term losses to “lock in” elevated long-term yields at levels not seen in a decade and a half. Looking back, the starting point for fixed income returns is vastly better than in 2022, when rates were near generational lows and the Fed was about to embark on a rate hiking cycle.
After this week’s softer CPI and sharp movement lower in bond yields, is this time different? Is it truly “all over now baby blue” for this tightening cycle?
This week we are providing our assessment of the third quarter S&P500 earnings season which could be appropriately summarized by AC/DC’s “Back In Black”, as the broad index has returned to profit growth after four straight quarters of declines.
Lags can be a powerful force, not just in music, but also in monetary policy. When it comes to lags, Jimmy Page walked so the Fed could run. One of Page’s innovations was capturing the Led Zeppelin’s “ambient sound” in recording, which is why the album sounds paradoxically rich and raw at the same time.
In Orlando, there are two large Halloween events that happen every year at the town’s theme parks. And after another tumultuous week in markets, we wonder which Halloween event the equity market is attending this year.
The When We Were Young Festival is this weekend, and though no NewEdge Wealth team members are joining the angsty youth in attendance, we can’t help but think that the emo music from this festival matches the mood of today’s market.
If an economic recession were to materialize in 2024 or after, renewed earnings weakness could be expected, challenging the current consensus forecasts of strong growth next year and the year after.