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Rethinking The Repricing
Market pricing for the Fed trajectory tends to overshoot.
It was clear in January that rate-cut pricing for 2024 was too aggressive with more than half a dozen quarter-point reductions in the forward curve. At one juncture, a March cut was almost fully priced.
By the time the May FOMC meeting rolled around this week, all but 29bps of what, at the extremes, was nearly 175bps of rate-cut premium, had evaporated into a succession of warm data, a big repricing over a fairly compressed window.
The
1Q earnings winding down with 72% of the S&P 500 having reported.
All following percentages are of reporters, market cap weighted. 71% beat 1Q cons rev, 88% beat 1Q cons EPS, 36% saw 2Q cons rev go up, 48% saw 2Q cons EPS go up, average stock reaction +1.0%. Sectors where >50% saw 2Q cons go up: CommSrvcs, Energy, Financials (rev only), InfoTech (EPS only).
At index level, for S&P500 in L2W 2Q cons sales and EPS are -10bp, 2004 cons rev -10bp EPS +40bp. Looking at sector level isn’t too notable.
Was hoping for something notable, but nope. Back to the company-specific salt mines, I guess.
Headline hockey aka whiplash