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On ‘E’
Most of the focus this week will be on the US CPI report, what it means for next month's rate hike and the extent to which it does or doesn't help make the case for the market's view that the Fed will ultimately cut rates by the end of 2023.
The Fed vociferously denies that rate cuts are likely this year. But it'll take more than the protestations of technocrats whose forecasting track record suffered a series of grievous blows over the past two years to convince traders. Market participants un
I’m expecting a kitchen sink and guide down earnings window. Corporate financial reporting has grey areas and management has the ability to massage results with electing to take items with negative financial impact when they choose. The current market narrative means the opportunity to take these negatives is now. Then management will guide down to lower the bar for 2023 as much as possible.
Excepting a soft landing to materialize and be the accepted narrative for most of 2023, earnings will beat these lowered expectations and possibly by a lot.
I’m expecting this all to play out as a near term peak in equities this week, a general down trend through March, then a strong bounce through Aug/Sept.
“The Big Bath” it’s called. It’s especially popular during leadership transitions. Pull forward every expense you can, post a disastrous quarter, and then future quarters come out smelling like roses.
One of the many things which majorly irk me is when I hear someone say “earnings were pretty good” just because they managed to exceed some much-reduced estimates. Often they have no clue when you ask what the change was from a year earlier.
But, that’s what we trade on.