S&P 5,000 By June (Or By Friday)
The S&P has a date with 5,000 by... well, by the end of the week if Monday and Tuesday were any indication.
I'm just kidding. You can't divine much from the price action at the current juncture. It's more noise than signal.
"Equities, as the saying goes, are 'trading short,'" Nomura's Charlie McElligott said Tuesday, before running through a list of remarkable statistics, including anomalous exposure reductions from the asset manager community, nearly $95 billion in global equities de-leve
I would gladly take that. Who knows what level of buybacks have been factored in to get to a 20.5 PE- but I seriously doubt the C-suite is going to miss out from meeting EPS targets if the gap can be bridged with buybacks.
Besides, it is not as if I like equities at an 18PE but I don’t at a 20.5PE…..everything is expensive- even holding cash.
Just wrote in one of my Bloomberg IB chats that this was the best headline of the day “S&P 5,000 By June (Or By Friday)” Congrats
How much of a role did $4TR liquidity from Congress and $4TR liquidity from Fed play in driving the market up during the last 18 months? “Huge” might be underselling it.
So what’s the negative market impact of those flows ending – and throw in rates lift-off for good measure?
Earnings growth, corporate buybacks, and other positives are clearly in store for 2022. I’m not confident that the +ves outweigh -ves.
If we add the blessed EOC (End of Covid) into 2022, then the picture looks better. However, the next wave is just starting in the US here in December; if it acts like precious waves, we might get “peak Omicron” in 2Q22 or so. While we are on the steep and accelerating part of the climb, it may be hard for markets to focus on EOC. And EOC won’t necessarily be as +ve for tech-dominated indicies as it will be for certain sectors.
Here’s UBS’s math on the taper (remember: every bank has tried to quantify this — it’s not possible to know with precision): “Reduction in liquidity/unconventional policies could be a ~6% hit to S&P 500: The Shadow Rate is a measure of the Fed Funds rate that also reflects the Fed’s easing through unconventional policies. After controlling for the ISM, the beta of the S&P 500 to changes in the Fed Funds-Shadow Rate spread stands at -0.035. This implies a reversal of unconventional policies could provide a 6% hit to the S&P 500. Our other approaches pointed to a 3%+ S&P headwind from pricing out QE.”
Thanks! Did UBS also quantify the SP500 impact of withdrawn fiscal policy i.e. end of pandemic aid (net of infrastructure and BBB)?