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Is The Stock Rally Overcooked?
Is the rally overcooked?
I don't know, but that question surely is. I've used it as the anchor for countless articles over the last eight years. It works every, single time, a testament to the enduring appeal of allusions to a market crash which almost surely isn't coming.
But who knows, maybe the post-election rally which saw the S&P bubble up through 6,000 (and remember children, the benchmark of all benchmarks was below 700 -- that's seven hundred -- in March of 2009, which feels like j
A more reasonable guess than a crash scenario is us large caps putting in a disappointing return over the next 5 or 10 years. Something like 3% per year vs inflation in that ballpark. So no real return…
That’s more likely in my view than a crash. Same for residential real estate too. Does not generate clicks though….
I think we will have the period where investors try to reckon out which of the innumerable promises, proclamations, and priorities – of not only Trump, but also those with influence on him and those who he appoints in power positions – will actually be pursued and come true. “Cut corporate taxes” is a broad positive. “Tariff Man” is (mostly) a broad negative. Then there are the more industry-specific things, from “build nuclear build” to “make America safe for ivermectin”, and the things that are two-edged swords like “produce more oil”. Add into the mix the newly empowered influence-holders like Musk, whose interests were not previously central to Trump-world but now presumably are. Then wonder what will get dropped to fund all the tax cuts – maybe push out a CVN or the B21 program, maybe privatize NASA under SpaceX’s control, maybe cut off NIH research or lop off the whole Dept of Education. And what will the knock-on effects be, when combined with likely higher deficits, resurgent inflation, trade disruptions, and who knows what else? If a particular company’s revenues get hit or COGS inflated, that will more than offset a lower tax rate. All that said, we are still in a positive seasonal period, so I’d guess the bulk of this reckoning is more of a 1H25 thing.
Speaking of the “corporate bid” so many are anticipating to add fuelntovthe rally….today i was talking with with one of our younger bucks
who came to us from the start up world. He was skeptical of my aversion to share buybacks in general, but had to acknowledge that CEOs executing them at these levels to enhance their personal should, at least, raise an eyebrow.
Seriously folks, is this what our favorite “stewards of our capital” be doing at these levels??
I remember Doug Kass calling March 2009 a “generational low”. Whodda thunk he got it that right. I didn’t believe him.