AFMC - Unsustainable: The One Word To Describe The Economy And Markets

2024-06-13 10:32:42 ET

Summary

• Equities continue to rise despite slowing economic growth, fast rising national debt, a deteriorating CRE sector and a faltering consumer.
• The detachment between equities and the economy is reminiscent of the Internet Boom and subsequent bust in the late 90s/early 2000s.
• NVIDIA has become the poster boy for this irrational exuberance, with a market capitalization much larger than all the energy companies in the S&P.
• Equities are priced at much higher multiples than they were at the end of 2021 when we were still in ZIRP environment.
• We highlight why both equities and the economy seem unsustainable in the paragraphs below.

There is one word right now that best describes both the economy and the markets, with the major indices at all-time highs in my mind right now. And that word is Unsustainable. Equities have continued to rise despite economic growth slowing from 4.9% in the third quarter of last year, to 3.4% in the fourth and a paltry 1.3% in the first quarter of this year. In addition, GDP growth estimates have come down over the last month for second quarter growth....

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