QVMS - The Fed Inflation And Stocks: A Long-Term View

• Analyst consensus estimates now put the net income of S&P 500 companies as a whole at 4.3% year-on-year growth in Q1. But with inflation running at a 7.9% pace, that means that in real terms, earnings growth is now negative.
• Strip out the effect of the spike in the energy sector's revenues, and the rest of the S&P 500 is probably tracking about a 7% earnings decline compared to last year. If this situation persists for another quarter, we can fairly call it an earnings recession.
• The arrival of this current inflation, which we believe will decline only slowly and will last for many years, is calling forth a Fed policy shift for the ages. That shift will have profound effects, and is the most important factor currently at work in markets.
• One thing that makes today quite different from the last big inflationary period is that debt levels - both government, corporate, and private - are much higher today than they were then.

For further details see: