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The S&P 500 is now down 12% from its high. That’s still within the garden variety 10-15% range, but nothing about today’s price action feels garden variety.
Credit spreads are often the canary in the coalmine, and they are indeed widening now.
Perhaps the oddest and possibly most disturbing chart is the US dollar. It’s very out of character that the dollar would fall so much at a time of stress.
The dollar crash makes the most sense to me. The market has voted and says tariffs will hurt US economy badly. The US Trade deficit will shrink a little but overall trade drop will be the bigger impact on the economy and inflation. US investments are going up but won't offset the negative impacts on trade, inflation and the dollar. The dollar drop shows that's the assessment of the market clearly. As trade volume shifts to other countries I would expect to see dollar demand drop with a lower reserver currency role and lower economic returns in the US from the trade war. Can this reverse quickly if everything is settled and tariffs are removed? I doubt it. Trust in the stability of the US as a trade partner is lost. Instead of blowing up all trade in 1 shot, making a series of deals to improve trade and strengthen trade relations was the smart move that is now lost. Net? If tariffs stay, market moves down. If tariffs are removed, the market will not fully recover until both revenues and earnings grow which could be years not months.
Can the market repeat the double-barreled gains of earnings growth and multiple expansion in 2025? I have my doubts. With the term premium on the rise and the Fed possibly cutting less than the market expects (if at all), I think it will be difficult for multiples to expand much further from here. That means that earnings will have to do the heavy lifting. Fortunately, they are expected to do just that.
Calendar year 2024 earnings are on track to grow 10%, and the cal2025 estimate is holding steady at a 12% growth rate. The earnings progression: S&P 500 cap-weighted chart below shows that the progression of EPS estimates has been relatively flat, which means they are resisting the usual downward drift.
JTimmer on US markets - 221222 - Based on DCF historical PE multiples, SPX may be 15% over valued - bottom as low as 3200 in 2023
According to my analysis, a fair-value price-earnings (P/E) ratio for the S&P 500® is around 15, based on the discounted-cash-flow model and the Fed cycle. Applying that fair-value P/E to trailing S&P earnings of $217 per share would imply a fair-value level of about 3,255 for the index—about 600 points or 16% below the market's close last week.
Jtimmer on US markets - 190911
https://www.fidelity.com/viewpoints/market-and-economic-insights/Q3-outlook?ccsource=email_weekly
since World War II, bear markets on average have taken 13 months to go from peak to trough and 27 months to get back to breakeven. The S&P 500 index has fallen an average of 33% during bear markets over that time frame. The biggest market value decline since 1945 occurred in the 2007-2009 bear market, when the S&P 500 sank 57%.
what are the key reference items for this article?
| Reference_description_with_linked_URLs____________________ | Notes__________________________________________________________ |
|---|---|
| Invest Tools | |
| i Invest Strategies | |
| m Fundamental Analysis | |
| Market Factors Analysis | |
| https://www.investopedia.com/slide-show/tools-of-the-trade/ | Indicators for Trade Plans |
| https://www.marketwatch.com/story/why-this-time-is-different-rings-true-in- todays-stock-market-2019-08-13?siteid=yhoof2&yptr=yahoo | Key Indicators for a down market - marketwatch |
| https://theweek.com/articles/901853/feds-15-trillion-intervention-explained fed-sales-purchases-to-banks-to-manage-rates-2020-theweek.com- The Feds 15 trillion intervention explained.pdf | Fed's role in supporting bank liquidity, rates during a crisis |
I want to go from the smartest dumb investor to the dumbest smart investor <<jim
Here are the big differences this time compared to last time.
• There are negative interest rates around the world.
• Negative interest rates cushion any potential drop in the stock market.
• Central banks have more tools, such as quantitative easing (QE).
• Politicians are more prepared on the fiscal front.
• If the trade war gets resolved, it may trigger renewed global growth and higher stock prices.
• Mortgage standards are much stricter.
• Corporate and sovereign debt is a bigger danger.
How to Invest a risky market
i>> want to fix budget and deficit problems from illegal migration ?
The interplay between Fed policy, inflation, economic growth and earnings will drive the market in 2023, analysts say.
But inflation could fall far enough (3%-4%) for the Fed to essentially think it has accomplished its mission (although it won’t say it directly as the target is still 2%), but for all intents and purposes, we could exit 2023 without a material inflation problem,”
A resilient job market so far has optimists — and Fed officials — arguing that the economy could avoid a so-called hard landing as monetary policy continues to tighten.
anticipating an economic recession to materialize early in 2023, as evidenced by the three quarters of projected S&P 500 index earnings declines and continued defensive sector leanings,” said Sam Stovall, chief investment strategist at CFRA, in a Wednesday note. “The severity of the recession remains in question. We expect it to be mild.”
I suspect that the US #market follows the #Brexit roadmap: In the 3 years since the UK referendum, the UK #stockmarket has moved sideways while #earnings have grown 30% & the fwd P/E has fallen 4 pts: 16x to 12x. In the US that would suggest a de-rating from 19.5x to 15x.
the 2023 Annual Energy Outlook from the Energy Information Administration (EIA) finds that U.S. oil production may even increase between now and 2050 even as clean energy sources like wind and solar power increase dramatically as well.
https://www.fool.com/investing/2023/02/26/bear-market-predictive-tool-not-wrong-in-77-years/
_market-indicators-recession-2023-fool.com-This Bear Market Predictive Tool Hasnt Been Wrong in 77 Years Heres Where It Says Stocks Head Next.pdf link
Inverted Yield
ISM below 43.5%
Economic LEI below 42
https://finance.yahoo.com/news/bear-market-leading-indicator-signals-094043906.html
S&P 500 experienced more than 10% drop in January 2022, which was considered a sign of weakness from a Wyckoff distribution topping formation. Yet, multiple red flags were provided as early warning via this leading indicator – Russell 2000 near the end of November 2021, at least 1 month before S&P 500 had a sharp drop of more than 10%.
https://corporatefinanceinstitute.com/resources/knowledge/finance/cape-ratio/
The CAPE Ratio (also known as the Schiller P/E or PE 10 Ratio) is an acronym for the Cyclically-Adjusted Price-to-Earnings Ratio. The ratio is calculated by dividing a company’s stock price by the average of the company’s earnings for the last ten years, adjusted for inflation.
The CAPE ratio allows the assessment of a company’s profitability over different periods of an economic cycle. The ratio also considers economic fluctuations, including the economy’s expansion and recession. Essentially, it provides a broader view of a company’s profitability by smoothing out the cyclical effects of the economy
In the past, the CAPE ratio has proved its importance in identifying potential bubbles and market crashes. The historical average of the ratio for the S&P 500 Index is between 15-16, while the highest levels of the ratio have exceeded 30. The record-high levels occurred three times in the history of the U.S. financial markets. The first was in 1929 before the Wall Street crash that signaled the start of the Great Depression. The second was in the late 1990s before the Dotcom Crash, and the third came in 2007 before the 2007-2008 Financial Crisis.
recent changes in the calculation of earnings under the GAAP distort the ratio and provide an overly pessimistic view of future earnings.
The “Buffett Indicator” as it’s called in Wall Street circles — which takes the Wilshire 5000 Index (viewed as the total stock market) and divides it by the annual U.S. GDP
Can't forecast accurately
Use the wave model to average out and average in as markets fall and rise to cash
If cash can be invested for a longer period ( 2 years? ), then look at SSO as a double SPY index that may take awhile to be net gain.
Bet on speed that deeper markets return from the lowest point versus the highest point
Evaluate where in the market cycle you are likely to be -
Individual companies stock may have factors that cause it to move very differently than broader markets ( good or bad moves ) so ALWAYS forecast any stock forward 3 years
At the sector level,
high PE stocks fall faster based on volatility and higher sector PE compression
value stocks that generate positive cash flows consistently fall at a much lower rate
real assets - land, commodities etc tend to fall the slowest in market crashes the exception is commercial real estate which is tied to business demand and growth
business context and value opportunities
Solana ( SOL )
The superfast smart contract platform has gained over 11,000% since Jan 1. Like Ethereum, it is a programmable blockchain. It currently hosts over 500 different projects, from non-fungible tokens (NFTs) to DeFi apps.
The reason Solana's captured people's attention is that it's able to process over 50,000 transactions per second (TPS), and each costs a fraction of a cent.
https://www.fool.com/the-ascent/cryptocurrency/best-cryptocurrency-apps/
crypto-exchanges-trading-2021-Best Cryptocurrency Apps and Exchanges for December 2021.pdf
exchange customers can buy and sell various digital currencies. They may also be able to do the following through the exchange's platform (not an exhaustive list):
Crypto currency apps
Here are a few to consider:
Where to store crypto: exchange or wallets?
it is a lot safer to leave your coins with the exchange or brokerage where you bought them. The best app for cryptocurrency will have excellent security and store your assets offline in cold storage. Several companies also insure the crypto assets they hold.
Exchange fees
Here are some fees to watch out for:
https://finance.yahoo.com/news/energy-transfer-could-getting-close-114400180.html
You can see Big Tech can have big years in growth ( Meta 2023 and YTD ) vs MSFT ( 2022 and 2023 ) etc. On the other, ignoring price ET retuns a steady 9+ % cash flow with an intent to grow that annually 3 to 5%. As a midstream carrier of multiple energy types ET has a predictable business volume, pricing and cash flow compared to most businesses so lower overall risk going forward
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given the analysis above are there any recommended next steps for DMX team members?
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