Eye On The Market

The affair with the market catalysts of the last decade is over now, and a new era of investing begins

View transcript with chart references 

Holiday Eye on the Market: the YUCs, the MUCs, FTX, the Gensler Rule and the Summers Rule

In the October Eye on the Market I wrote about how in 6 of 7 post-war recessions, equity markets preceded the decline in profits, employment and GDP by several months at least. I also mentioned that the best indicator to follow was the ISM survey, which tends to coincide with the equity market bottom +/- 2 months. So, in the interest of thinking about when equities could bottom, the first chart below projects the ISM survey by looking at new orders and inventories. Using this crude approach, the ISM would bottom in the mid-40’s in December. If so, 3570 on the S&P 500 Index reached in mid-October could actually mark the low for the cycle; such a scenario should not be discounted entirely, and would be consistent with market history.

Reruns: how equity declines precede the fall in earnings, growth and employment during recessions; new US semiconductor export policies on China and the clash of empires; and other press article extolling the renewable energy virtues of a country with little relevance for anyone else

Arrested Development: the pressure on profit margins, the tightest labor markets in decades and whether “second chance” policies for those with criminal arrest records can expand the labor force

Three topics in this month’s Eye on the Market. First, an update on the Fed, inflation and corporate profits since we believe the June equity market lows may be retested in the fall. Second, a detailed look at what would have to happen for the climate bill’s projected GHG savings to actually occur; the answer matters given the implications for the US natural gas industry. And finally, will all the new IRS agents really stick to auditing taxpayers above $400k? Data from the GAO suggests there may not be enough of them to meet the Administration’s revenue targets.

Topics: A revised map of the United States; investing in equities before a recession; Russia’s natural gas squeeze on Europe leads to another rescue program for Italy; the high cost of pariah status for the oil refining industry

Hydrogen use cases may be much narrower than advertised, and the timeline is a very long one

Fossil fuel bans, heat pumps and electrification of winter heating: What will happen to transmission grids at times of peak loads if no backup heating systems are in place? And what about the pace of change if bans on fossil fuels only apply to new buildings?

The slowdown induced by central bank tightening is just starting. Be patient when adding risk to portfolios. Valuations have declined materially but the price paid for high earnings growth is still elevated.