2024-07-25 08:30:21 ET
Summary
- The inverted yield curve in recent months hasn't led to a recession yet, possibly due to big tech companies' influence and other reasons.
- However, the leading economic indicators are worsening - never before have the LEIs declined for so long without a recession. We're likely in a late-cycle economy.
- Achieving the currently priced-in growth rates for the next year, which resembles a recovery phase rather than a late cycle, would require historically high rates, around 20-25%.
- The current FWD ratio is 14.5% and 23.5% higher than the 5 and 10-year median multiples, respectively.
- Investing in SPY at these high valuations, where mid to high double-digit earnings growth is already priced in, is based on the expectation that more market participants will drive prices higher - a classic "greater fool" bet.
If you read my articles regularly, you've probably seen my previous macro notes and research regarding where the market may move next. To be honest, I missed the hype associated with artificial intelligence. I was also a little late in identifying the market reversal and determining the strength it could achieve, so I was forced to admit my mistake at the beginning of 2024, calling on everyone to remain cautious and not to buy into the S&P 500 ( SPY ) ( SP500 ) rally. As this often happens with those who bet against the long-term bullish trend, my cautious forecast, unfortunately for me, didn't come true, and the market continued to rise due to the strengthening positions of big tech companies:
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For further details see:
SPY: Don't Be The 'Greater Fool'