Bears, Bulls And The People In-Between

It's "premature to sound the all-clear," Morgan Stanley's Mike Wilson said, of US equities, which continue to look a lot like falling knives in his eyes. Stocks rode a three-week win streak into July's CPI report, which is expected to show price growth receded last month. Wilson's message on falling inflation: "Be careful what you wish for." He cited market-based measures of inflation expectations in noting that from all appearances, "the bond market has quickly turned from a vigilante to a be
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6 thoughts on “Bears, Bulls And The People In-Between

  1. I think Wilson’s view of the current and likely future negative operating leverage situation is on the money and if there is a recession, travel, hospitality, hospitals and clinics, and other high fixed cost industries will get creamed.

    1. The Intercept piece wasn’t quite the ‘gotcha’ their headline made out. See It was a client research note rather than an internal memo, and BofA ‘hopes’ the ratio of job openings to unemployed comes down to more normal highs, as the Fed are hoping as well. Larry Summers thinks that is wishful thinking, and the article points reminds that he thinks unemployment ‘needs’ to be, say 7.5% for 2 years, to get inflation under control.

      1. Exactly. See my comment below. That article in The Intercept is a terrible misrepresentation. I didn’t read their reporting before, but I surely won’t now. That article seems to reflect a total lack of editorial oversight or else a total lack of editorial competence, with the latter being far worse than the former.

    2. That article in The Intercept is wildly disingenuous and I can’t believe that BofA has let that reporting stand. That article is (and I really don’t know another adjective here) wildly irresponsible.

      That is not an “internal memo.” It’s a client note. And Harris isn’t “an executive.” He’s their chief economist.

      There is nothing — I repeat nothing — unusual about that note, and the fact that The Intercept published a screenshot of it as though it’s some kind of top secret document reflects an embarrassing lack of knowledge on their part. That note was probably sent out to every financial media outlet on the planet who’s on BofA’s media distribution list.

      Again, I want to emphasize to readers in the strongest possible terms: That article that the comment above references is totally ridiculous and reflects a complete lack of understanding on The Intercept’s part vis-a-vis sell-side research and, frankly, the macro economic debate in general.

      In my opinion, it should be retracted.

  2. Good summary of the 3 houses’ views.

    On the reasoning of JPM the outlier, am trying, and struggling a bit, to imagine what could make their arguments prescient 6-12 months down the road: “elevated corporate pricing power” & “ongoing revenue growth”, apparently have to be linked to “consumers still have excess savings left over from the pandemic” (which is at odds with worsening consumer sentiments, except for segments catering to high-income households?) and “the labor market is strong” (forward looking basis, it’ll be premised on soft-ish landing?)? As for “financing costs that are perhaps less onerous than inflation suggests” and “US home prices should be resilient given still low inventories”, seem premised on the conviction that Fed wouldn’t go too restrictive (say FFR>4.0%) and stay there too long? And it all boils down to the judgment that inflation will be less pressing an issue a year from now, to which Pozsar said one is too optimistic; while Wilson said slowing inflation will pressure profits… 1 year from now, who will be right?

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