SSPY - Wall Street Exclusive: A Story Of 2 Different Markets
2024-07-13 01:05:08 ET
Summary
- Growth initiatives and maintaining the present competitive tax rate structure will be necessary to keep corporate America resilient.
- It is no secret now that the "average diversified" portfolio has underperformed this year as investors have flocked to "anything AI." That has made for a more difficult backdrop.
- Looking at the global markets, US stocks are overbought, while Europe's stocks are slightly oversold.
- Technology, Energy, Communication Services, Financials, and Healthcare are expected to lead the Q2 earnings parade.
“Don’t give up at half time. Concentrate on winning the second half.” –
My View of Wall Street
Economy Has Been ‘Riding A Wave’ Of Strength
Despite the most aggressive tightening cycle in four decades, the economy has been riding the wave of consumer strength since the post-COVID recovery. But with the consumer showing signs of fatigue (e.g., rising delinquencies, slower discretionary spending, fewer splurges), the labor market starting to slow, and inflation taking its toll (particularly for lower-income consumers), mainstream analysts and economists are pounding the table for the Fed to start dialing back some of its policy restraint to keep the recovery going.
Of course, one might argue that the lumpy economic data, which sometimes indicates slowing and then some areas with resilience, suggests that Fed policy isn't restrictive.
The Fed’s trick will be to cut interest rates in time to avoid an economic wipeout (aka recession) without further stoking inflation pressures. Consensus calls for this year's end and some additional easing in 2025. The idea is to keep GDP growth near the trend of 2.1% in 2024 and 2.0% in 2025. Just like the first couple of 25 basis point hikes didn't make any difference for months, one or even two 25 basis point rate cuts won't move the needle on the economy. The Fed is also looking over its shoulder at the cost of paying for America’s national debt, which crossed the 1 trillion dollar mark in 2023 , driven by high interest rates and a record $34 trillion mountain of debt. One has to wonder if that will also factor into their decisions, leaving inflation a secondary concern and opening the door for round two of inflation. Suffice it to say the Fed is in a VERY difficult situation now....
Wall Street Exclusive: A Story Of 2 Different Markets