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What The #$%& Is A Shallow Recession

What The #$%& Is A Shallow Recession This week, DataTrek founder Nick Colas is visiting his in-laws in Memphis for the Thanksgiving holiday, and as he notes, contact with what New York finance types call “the real world” is always an educational experience, given his usual cloistering in midtown Manhattan. To celebrate his brief freedom from the Big Apple, if only for a few days, are two brief thoughts based on a few interactions during his time here. Below we excerpt from the latest Morning Briefing by Nick Colas of DataTrek #1: What the #@$% is a shallow recession? My hotel’s breakfast area had business TV on this morning, and one of the hosts said, “markets are expecting a shallow recession next year”. She was not wrong. US equities trade for 18x current earnings, which strongly implies either no diminishment of corporate earnings or, at worse, a dip sometime in 2023 but then a swift recovery. An older gentleman sitting opposite me at group table shook his head and grumbled the question noted above. His observation, implying that any recession can be “shallow” is at best euphemistic and at worst delusional, is also not wrong. Since World War II, the shallowest recessions in terms of their effect on US GDP growth were in 1990 and 2001. The chart below shows quarterly real GDP growth from 1947 to 2019, with the 11 official NBER recessions over that period noted by the gray bars. We have put a dotted line across the 1 percent contraction level. All but the 1990/2001 recession exceeded that number. Many readers will recall the 1990 and 2001 recessions, and I am fairly sure none would think of them as “shallow”. The first was due to an oil shock caused by Iraq’s invasion of Kuwait. US unemployment went from 5 to 8 percent over 2 years. The second was caused by the bursting of the dot com stock bubble and the 9-11 terror attacks. Unemployment rose from 4 to 6 percent. The lesson here is that even “shallow” recessions have real world outcomes and, in the case of 1990 and 2001, came with other problems. Yes, perhaps the Fed can thread the needle of reducing inflation without causing a steep recession. We certainly hope it can. But I think it will pay to have some of the skepticism offered by my dining companion until that result becomes somewhat clearer. * * * #2: Help wanted. There are still many small businesses in the Memphis area looking for workers, especially those with seasonal labor needs heading into the holidays. The shortage of workers is evident here, as it is across the country. It has been thus for over 2 years, with wage inflation a necessary byproduct of that phenomenon. The chart below shows US labor force participation (people in the workforce divided by the total population) for 25 – 54-year-olds (in red, left axis) and all adults (black line, right axis) from 2015 to the present. Two points on this data: Prior to the pandemic, aggregate and 25 – 54 LFP was rising. The former hit 63.4 percent in February 2020, its highest level since June 2013. The latter got up to 83.1 percent, the best level since May 2013. A strong, late cycle US economy was pulling Americans into the workforce. Today, both LFP levels remain below their pre-pandemic highs. Working-age (25 – 54-year-olds) LFP is 0.4 points lower, which translates into 520,000 “missing” prime-aged workers. Total LFP is down 1.2 percentage points, or 3.2 million people. The upshot here is that, despite population growth, there are scarcely more workers in the US now than at the start of the Pandemic Crisis. According to BLS data, the civilian non-institutional American population has grown by 1.9 percent since February 2020. The total number of Americans in the workforce has only grown by 0.5 percent. Linking this discussion to the prior point about recessions, it is worth noting that every economic downturn since the 1980s has seen labor force participation either stay flat or decline. In the 1970s/early 1980s, LFP was stable through recessionary periods primarily because women were still entering the American workforce. In the 1990, 2001, and 2007 – 2009 recession, LFP fell by 2 points or more during/after each downturn. The lesson here is that a recession does not draw people into the workforce, so the current labor shortage is unlikely to ease very much in a “shallow” recession. An economic downturn should, however, reduce wage inflation to some degree if employees feel they no longer have bargaining power with respect to their pay. Still, this may not be enough to bring wage growth in line with productivity growth if the supply of labor contracts over the next 1-2 years. Tyler Durden Sun, 11/27/2022 - 21:30.....»»

Category: worldSource: nytNov 28th, 2022

We spoke with more than 50 CEOs, billionaires, execs, and government officials in Davos. Here are our 4 biggest takeaways.

Our conversations give insight into what's on the minds of the business elite, including AI, return-to-work policies, and the economic conditions. Davos always gets a lot of attention and criticism.FABRICE COFFRINI/Contributor/Getty Images Insider's Matt Turner and Cadie Thompson share their biggest takeaways from the World Economic Forum. Several of the executives they spoke with said the economic picture had lightened in recent weeks. AI and ChatGPT were popular topics, even from those who warned of the risks. Davos was back.More than 1,500 business leaders descended on Davos in the Swiss Alps last week for the World Economic Forum's annual meeting. We were there to take it all in. Davos always gets a lot of attention and criticism. One banner hanging from a balcony above the main congress center last week read: "Wow this is what corruption looks like."But from a reporting perspective, Davos is an incredible opportunity to meet with executives and government officials from around the world and across industries in a very short space of time.We had 50 meetings, plus breakfasts, lunches, dinners, panels, and parties. It was intense and stimulating. One of the most oft-asked questions there is: What are the themes you're picking up on? With that in mind, we put our notes together to define four themes that came up over and over. These don't capture everything, of course, but they should give you insight into what's on the minds of the business elite. There's going to be a recession. It's no big deal. Several of the executives we spoke with, from places like New York, Shanghai, Munich, London, and Zurich, said the economic picture had lightened in recent weeks.In particular, some pointed to China's reopening as a positive development for the global economy. Kweilin Ellingrud, a senior partner at McKinsey in Shanghai, told Insider the full effects of this were likely to kick in during the second quarter, with a surge in spending around travel, luxury goods, and dining. That may benefit Western brands, even as local companies pick up market share.There were also positive signals for the US-China relationship, with Chinese Vice Premier Liu He taking the stage with a speech emphasizing "strengthening international cooperation."Ellingrud said there was an increased understanding that there would be US-China competition in some places and cooperation in others. Caroline Cox, the chief legal, governance, and external-affairs officer at BHP, the world's largest mining company, said she, too, sensed a more-constructive tone from China. In the US, meanwhile, there are signs that inflation is slowing, even as the job market shows continued strength. US jobless claims came in at 190,000 — fewer than expected — during the week of the meeting. And as one major bank CEO noted, that's before any real spending from the Inflation Reduction Act or Infrastructure Investment and Jobs Act has kicked in. And Russia's invasion of Ukraine has driven a boom in defense manufacturing, with firms replacing weaponry that's been shipped to Ukraine."There's a lot more optimism now, particularly in the labor market," Becky Frankiewicz, ManpowerGroup's president of North America, said. "So you saw the eurozone unemployment reached a historical low; the US labor market is on a 50-year low for unemployment. And so the labor markets are defying the odds of economic principles." Lastly, a warmer-than-expected winter in Europe has taken some of the pressure off energy supplies there.To be sure, what these executives were largely describing is a more-positive (or less-negative) assortment of likely outcomes for the global economy, rather than a fundamental shift. Most still expect a global recession that's more keenly felt in Europe. "My personal view is: I think that if we have a recession in the US, there's a really good chance that could be very short and shallow," Paul Knopp, the CEO of KPMG, said. "If there is one, the global picture is more complicated."Still, it's a subtle shift in tone after months of doom and gloom. Jörg Ambrosius, the chief commercial officer at the investment giant State Street, called it "some light at the end of the tunnel."AI will change everythingYou couldn't get far into any discussion at Davos without the topic of artificial intelligence and ChatGPT, in particular, coming up."I have never seen this much excitement about anything in my life," Omar bin Sultan al-Olama, the United Arab Emirates' minister of state for AI, digital economy, and remote-work applications, told Insider. Mihir Shukla, the CEO and a cofounder of Automation Anywhere, likened ChatGPT to how self-driving cars captured people's imagination. And Coursera's CEO, Jeff Maggioncalda, described ChatGPT as a mind-blowing "game changer."While Microsoft basked in the glow of ChatGPT's hype, some of its rivals were left gritting their teeth and warning of the risks. Alphabet, which has long been a leader in AI, has found itself on the back foot, for example. The T in ChatGPT stands for transformer, an architecture introduced in a 2017 research paper from Google. The week of Davos, Alphabet published an explainer on its approach to AI signed by execs including CEO Sundar Pichai. "We understand that AI, as a still-emerging technology, poses various and evolving complexities and risks," the post said. The timing of the paper sure didn't seem coincidental.It wasn't just tech giants warning of the risks, with executives discussing everything from mass-produced misinformation to significant impacts on the labor market. One exec said they'd heard a CEO at Davos say ChatGPT would replace a huge swath of his customer-service workforce within a few years, for example. Shelley Stewart III, a senior partner at McKinsey, said there would be a much-greater need for occupational switching and retraining as some jobs changed or were eliminated by the advent of AI."With every technology, there is good and then there's bad," Rima Qureshi, Verizon's chief strategy officer, told Insider. "I'm a firm believer that in the long run, the good wins out over the bad, but we have to be aware that there are pitfalls with every technology."For sustainability, a question of howThe climate crisis, sustainability, and the energy transition were front of mind for many in Davos.But according to Abby Klanecky, the chief marketing and client-services officer at the management consultant Kearney, many companies are still looking for a place to start. "We get the what and the why," she said, describing conversations with clients around sustainability. "But give us a practical guide for how to do this."Put another way, "the anxiety is there, but knowing how to act is not," John Granger, the CEO of IBM Consulting, said.The pressure is on. Many companies have set net-zero goals without necessarily having a concrete plan for how to achieve them, executives who spoke with Insider said. John Waldron, the chief commercial officer at Honeywell, said there would likely be increased governance around those net-zero goals, which would force companies to either comply or roll back their targets. And significant changes in operations are required for many, emphasizing the need to start acting sooner rather than later."Companies can't carbon-offset their way to net zero," Waldron said. Several of those who spoke with Insider highlighted the need for much-greater collaboration among companies — and a willingness to experiment. Granger called for "radical collaboration" across industry verticals, a point echoed by Klanecky."None of the problems we're talking about can be solved by one company," she said. And Ambrosius from State Street said there's a need to act now, with the knowledge that some experiments may fail. "We're going to give it a hard try, and if eight out of 10 things fail, that is a better outcome than not doing anything," he said. "Waiting is no option anymore."BHP's Cox said that many of the technologies required for the energy transition hadn't arrived yet. She pointed to BHP's work testing different fuels in shipping, from biofuels to liquified natural gas, as evidence of the need for experimentation. One dark cloud for many: the complexity of getting projects approved. Several mentioned US Democratic Sen. Joe Manchin's permitting-reform efforts, which have hit a wall in the Senate, as evidence of what's required.Your boss wants you back at work. Why?Wanting to bring everyone back to the office is akin to "raging against the dying of the light of the old model."That's according to Nick Studer, the chief executive of the management consultant Oliver Wyman. He said he found the discussion around the return to the office an "incredibly sterile debate."First, there needs to be a redesign of the work that is done in the office, and then there needs to be a redesign of the office itself, he said."We want to be together when there is a task that requires us to be together," he added. "Not every task does."Real-estate leaders, meanwhile, noted that many office buildings would become obsolete. Some could be transformed into residential dwellings, but others may need to be torn down."You will have a lot of obsolete buildings at the end of the day which are not suitable to be upgraded, or it is financially not viable," Christian Ulbrich, the CEO of JLL, said. "So we have to repurpose those buildings in some form or fashion, or they will be empty and will be taken down at some point in time."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 25th, 2023

"Labor Hoarding": New Theory Emerges To Explain The Lack Of Labor Market Collapse

"Labor Hoarding": New Theory Emerges To Explain The Lack Of Labor Market Collapse Setting aside how credible any data released by the BLS now is - considering that not just this website but even the Philly Fed has challenged the accuracy of the Payroll reports' Establishment survey, while Goldman recent found that actual layoffs as indicated by state WARN notices are far higher than those seasonally adjusted by the Department of Labor, there was one data point that prompted quite a few commentators to scratch their heads. Recall that one of the reasons stocks were pleasantly surprised by the jobs report is that not only did payrolls dip again (if printing as usual above average), but average hourly earnings slumped. But there was more: alongside the decline in wages, average hours worked also declined (which had a material impact on the average wages, and had hours been flat, the decline in average wages would have been even more pronounced). Why does this matter? Well, as Goldman trader Rich Privorotsky wrote on Friday, the deceleration in wage gains as of late and "the shirking of hours worked is in no way consistent with a wage spiral, and in fact suggests something unusual might be happening as corporates reluctant to shed hard to find labor are shrinking the work-week/hours worked rather than cutting payrolls." This would make intuitive sense if one assumes that employers are still smarting from the difficulty to find workers in the post-covid months when millions of low and medium-income workers simply exited the workforce. As such, if everyone is convinced that the coming recession will be light, employers are more tempted to shrink (in some cases aggressively) their employees' hours rather then engage in layoffs, especially if they are concerned they will have difficulty finding workers in a few months (all of this, of course, assumes that the recession will be "shallow" whatever that means). As evidence, Privorotsky shows the decline in the average employee workweek as proxied by both the Philadelphia and Empire Fed's surveys. Others at Goldman agree, and in a note published by the bank's economist team looking at the ongoing rebalancing in the labor market (available to pro subs), they found that while Labor demand still remains high it is now falling: "The trend has admittedly become murkier recently as measures of job openings have diverged. But the average of these measures is still declining, and business surveys also suggest that total labor demand is still coming down." Here is the interesting part in the Goldman report, : Labor supply has at most a bit more room to recover. The discussion about labor supply during the pandemic has mostly centered on “missing workers,” and for the first couple of years there was indeed room for the labor force participation rate to rebound as fiscal support and Covid fears faded. But we noted last summer that the participation rate had already largely recovered, and the small increase in December to 62.3% brought it to our year-end target that embedded some further cyclical recovery to offset an ongoing downward trend driven by demographics. While prime-age participation is still a bit below its pre-pandemic rate, the overall participation rate has now nearly returned to the CBO’s estimate of the trend implied by demographic changes, as shown on the left of Exhibit 4, and a new paper by economists Bart Hobijn and Ayşegül Şahin also suggests that the gap is largely closed. The remaining labor supply shortfall relative to pre-pandemic trends actually comes less from reduced participation than from a decline in average work hours. In another paper, Şahin, R. Jason Faberman, and Andreas I. Mueller use data from a supplement to the New York Fed’s consumer survey to show that workers’ desired work hours dropped sharply during the pandemic and remained depressed at least through the end of 2021, when their data end, with much of the decline coming from people classified as outside of the labor force who occasionally enter it, such as retirees. New research by Dain Lee, Jinhyeok Park, and Yongseok Shin shows that average hours have fallen since 2019, especially among college-educated prime-age men and among those who work the longest hours, as shown on the right of Exhibit 4. Because, as the authors note, these workers work far longer hours than is typical for US workers let alone those in other high-income countries, this change might persist to some extent. Maybe the best discussion on this topic comes from Amberwave co-founder Stephen Miran, who earlier today tweeted some of his observations on why the US is still not in a recession, and concludes that "the principal reason is the missing construction layoffs.  Mortgage rates shot up from 3% to 7%, making buying a home unaffordable for many folks.  Normally, one expects a slowdown in construction activity and layoffs.  But, construction employment is at all time highs!" The principal reason is the missing construction layoffs. Mortgage rates shot up from 3% to 7%, making buying a home unaffordable for many folks. Normally, one expects a slowdown in construction activity and layoffs. But, construction employment is at all time highs! pic.twitter.com/AepOyF113r — Stephen Miran (@SteveMiran) January 22, 2023 Arguing that in light of the dramatic slowdown in activity in the construction sector, "we'd expect huge layoffs"  with "expected layoffs in the neighborhood of 500k to 800k jobs, and with multipliers, this would be 1 to 3 million total losses. That's a real recession." But these layoffs still haven't taken place, prompting Miran to proposed several explanations why not: 1. They will.  (Maybe, but I don't see -any- sign of them in the data...yet.). There are some reasons for expecting the layoffs to eventually come.  In particular, the huge divergence between the number of homes being sold and the number of homes currently under construction, which will presumably come down as homes are completed. 2. The extraordinary backlog of homes demand due to pandemic changes in the economy like wfh.  This is a possible explanation, but presumably at some point runs out? 3. Labor hoarding by builders, i.e. holding onto employees for fear of being able to replace them if necessary in a tight labor market.  Miran says that he is "generally dismissive of labor hoarding for the economy as a whole, but more sympathetic in the building sector.  Why?" The principal reason is the Infrastructure Investment and Jobs Act, passed in 2021.  As I pointed out at the time in WSJopinion, the IIJA is going to further fuel inflation. Going into CY2023, there's going to be ~$38 billion of Federal spending on construction and other projects kicking in. In CY24, it'll be closer to $54 billion.  Assuming some multipliers, these go a long way to offsetting a big chunk of the decline in private structures spending. (Ignore the decline in direct spending here, that's largely the offsets from reduced spending on phrama or subsidies to GSEs) In other words, I suspect builders are holding onto employees because the $$$ being spent by Uncle Sam on construction are going to start kicking in this year.  Given a historically tight labor market where employees seem to have all the power, they'd rather hold onto the workers Why lay off your workers now if you expect real difficulty in hiring them back if building starts to pick back up, particularly for nonresidential construction? While this may well be the most likely explanation, and one which will be tested most easily by the severity of the coming recession (if indeed there is labor hoarding within construction, an extended deterioration in the sector will only result in an even more acute collapse in construction jobs in the near-term), there is another possible explanation, namely that financial conditions have eased significantly since September: stocks, mortgage rates, the dollar. It's not difficult to imagine a world in which home prices fall by 10% or so, but given strong wages, resilient stocks, and falling mortgage rates, final demand stays robust.  Given the historic run up in home prices, builders are still very profitable at those levels. In other words, maybe builders expect a surge of private demand in the near future and are therefore holding onto their employees. Miran's conclusion is spot on, and boils down to the following: The missing construction layoffs ARE the missing recession.  If they come, we'll have a recession.  There's a reason for expecting them to come (homes under construction lagging sales), and reasons for expecting them not to (future demand picking up, private & public) Watching this sector will give us a clue as to whether we'll see a recession or not.  In the meantime, real incomes are accelerating on lower inflation, and as I've stressed 100x, financial conditions easing ought to induce a pickup in GDP growth There is thus some chance the economy reaccelerates before those layoffs come, and the recession is avoided.  However, in that case, the Fed will be goaded into a new hiking cycle, as inflation will pick back up, and the recession will be delayed and not avoided. Afternote: there's a race between the exhaustion of the backlog & the coming construction layoffs, vs. a reacceleration of the economy on easing financial conditions & IIJA boosting construction demand. Which of these forces wins the race determines whether we have: Recession, or Burst of growth, followed by new hiking cycle, followed by recession In other words, we will either get a recession, if construction employment suddenly tumbles, or we will get a transitory growth burst - largely on the back of the market pricing in the coming Fed pause - which will avoid a round of mass layoffs in construction, which will however lead to even more inflation, and an even more aggressive hiking cycle, leading also to recession. Tyler Durden Mon, 01/23/2023 - 18:00.....»»

Category: worldSource: nytJan 23rd, 2023

Inflation Assets Are Leading The Recovery. That"s Not Normal

Inflation Assets Are Leading The Recovery. That's Not Normal By Marcel Kasumovich, Head of Research for One River Asset Management It’s normal, sort of. Digital asset markets are following a commodity boom, bust, recovery cycle. Investors are focused on the bust. The decline in inflation, bond yields, and the US dollar makes the downturn shallower. And inflation assets are leading the recovery. That’s not normal.  Inflation Assets Leading the Not-Normal “If you want two cups of coffee, save money and order both at the same time,” a student at the University of Freiburg famously quipped during Germany’s hyperinflation. That’s the inflation we worry about – pernicious, invisible tax. The recent surge in inflation is an inconvenience by historical standards. Periods of inflation lead people to shed currency for almost any real asset – even pianos were a hedge for Germans in the 1920s. That’s not now. But it’s also not never. The pandemic brought a warning shot, a reminder that the saying “too much money chasing too few goods” still applies. Global inflation surged to 9% last year as bottlenecks emerged in all supply chains. Assets believed to hedge inflation performed dismally. Real assets – bitcoin, gold, lumber, land – crashed as inflation rose. Those assets didn’t “fail” in their roles. Real interest rates shot higher. And that’s the real driving force behind inflation assets.   The evidence is obvious in investor behavior. There was a dash for cash as inflation rose, not real assets. Last quarter, Global Fund Managers reported the highest cash holding since 2001! The inflation tax was an afterthought. All other assets were rapidly deflating in response to the surge in rates. That is not an inflationary mindset. It’s conviction that policy will kill inflation, leaving real rates higher for a stretch of time. And it’s self-reinforcing. Market expectations call for a cratering of inflation this year, to 2.33%. It’s also expected to stay there for a very long time, 2.19% in 2024 and an average of 2.29% in the next ten years. The consensus is centered on the idea that a recession will bring everything back to “normal.” And it is exactly how investors are positioned – long bonds, short equities, and long US dollar (Figure 1). Our own Macro Pulse confirms the consensus – it’s in recessionary territory. But change is afoot. Downturns don’t last long, even brutal ones. They are usually fast, severe fractures. This one is slow and shallow. Our Macro Pulse has been in recessionary territory three of the past four months; the longest recessionary signal was nine months in the Great Financial Crisis. Market stabilizers are also emerging. Declines in inflation, bond yields and the US dollar are cushioning the downturn with mortgage and business surveys bottoming.   Commodity markets provide the simplest connection to the cyclicality of digital assets. Doug Wilson, One River Digital PM, likens the downturn in digital infrastructure to a boom, bust, recovery cycle of energy markets. It’s a terrific benchmark. Bitcoin is a unit of energy. The boom saw Bitcoin trade miles above its marginal cost of production. That boom led to excess investment. The bust that followed is like an over-supplied commodity cycle.   What does the recovery look like? Let’s benchmark the boom-bust-recovery cycle through the macro lens of recessions. Figure 2 shows median oil prices in the past 4 economic cycles. The most interesting observation – oil prices aren’t anywhere close to the downturns of the past. This is the “too few goods” side of the inflation equation. A long period of commodity underinvestment means that inflation assets don’t decline to the same degree in recession.   It also means inflationary assets can lead in the recovery, counter to the consensus of a return to “normal.” But inflation assets are supposed to lag, not lead. It takes an extended period of strong demand to absorb excess capacity built in this expansion. Those are the assets soonest to bump up against capacity constraints and be demonstrated as short in supply. Cyclical forces are pulling down inflation, structural pressures may be less benign. Digital asset markets are recoupling to macro forces. Inflation assets are leading this year and digital assets are rising with that tide. The differentiation within the digital ecosystem is telling. Base layers and scaling solutions are leading – Bitcoin and Ethereum are back to pre-FTX levels, Optimism scaling protocol has risen well above pre-FTX highs. DeFi protocols are lagging, most notably MakerDAO, as it wrestles with its strategic future pathway. Market leadership is in the boring basics. We should pay attention. Bitcoin, Ethereum, Lightning, Optimism – base layers with scaling solutions for usable applications. We know that digital asset valuations are all about network effects. But investing in railways is pointless with no demand to ride them. Tokenization has been wildly successful in bridging traditional and digital worlds. That’s one trajectory of turning the boring into beautiful. Tyler Durden Sun, 01/22/2023 - 21:30.....»»

Category: worldSource: nytJan 22nd, 2023

The Three Core Pillars Of The Bear Case

The Three Core Pillars Of The Bear Case With market narratives flip-flopping on a daily basis like a dying fish, bouncing from bullish to bearish and back again driven purely by price action which in turn is a function of technicals, it is easy to forget that there is a fundamental case for risk. And while the bullish case is simple - the market sees the Fed cutting over 200bps in the next two years (realistically, much more) even as the Fed vows to keep rates higher for longer... ... there is also a substantial bearish case that can be made, and that's what Bloomberg Markets Live strategist Ven Ram has done, pointing out that stocks have not only failed to breach the seemingly insurmountable technical resistance of the the S&P's descending channel... ... or the huge pin at 4,000, but that to rally meaningfully, stocks must promise three things: an improved income return. a considerable nominal increase in earnings (meaning companies should be able to pass on inflation to consumers). multiple expansion: investors should be willing to pay more the same set of earnings, all else being equal And while "if you combine all three of those, you would get an astounding year", Ram cautions that it is unlikely we get one let alone all three, as he explains in his note below: Break free. US stocks have been attempting to do that innumerable times in recent months, though it seems like the optimists want to cross over the Atlantic on the slender wings of a fruit-fly. It’s not hard to see why the S&P 500 has struggled to get past 4,000. To rally meaningfully, stocks must promise an improved income return. Or a considerable nominal increase in earnings, meaning companies should be able to pass on inflation to consumers. Or investors should fundamentally be willing to pay more the same set of earnings, all else being equal — a re-rating, in other words. Of course, if you combine all three of those, you would get an astounding year. For all those who stick a finger in the wind and posit a higher S&P, I wonder what gives. An improved income return would stem typically from buoyant dividend yields, though the news here is grim. The current estimated dividend yield on the index is around 1.75%, below the average of about 2% since the start of the millennium. As for earnings, assuming even a shallow recession this year as the base case, it’s hard to project meaningful real earnings growth, let alone nominal. Which brings us to a possible re-rating, which is where the bulk of optimism seems to rest. The Fed has said more times than anyone would care to hear that it doesn’t envisage slashing the benchmark rate this year. The markets are adamant the monetary authority will — essentially a bet that the estimated earnings yield of some 5.75% on the S&P 500 will get a leg-up based on its relative allure versus Treasury yields. Yes, inflation is slowing, but is it going to crumble all the way to 2% that the Fed will throw caution about inflation to the winds and instead begin to accommodate the economy? I am not holding my breath. Tyler Durden Sat, 01/21/2023 - 09:55.....»»

Category: blogSource: zerohedgeJan 21st, 2023

: Gold futures shake off early gains to finish lower

Gold futures finished lower on Wednesday, giving up early gains seen in the wake of U.S. data showing a slowdown in wholesale inflation and retail sales to finish lower. The end of Federal Reserve tightening is approaching, “but a shallow recession might not be supportive of inflows for gold as that might lead to a stronger dollar,” said Edward Moya, senior market analyst at OANDA. Gold for February delivery GCG23 fell $2.90, or nearly 0.2%, to settle at $1,907 an ounce on Comex.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news......»»

Category: topSource: marketwatchJan 18th, 2023

Here"s what top executives at Davos are saying about a recession. Many can see silver linings.

C-suite members at companies like McKinsey, EY, and Cisco talk about economic growth, labor markets, and hiring practices at the World Economic Forum. The World Economic Forum is being held this week in Davos, Switzerland.Zheng Huansong/Getty Images. Executives at Davos weighed in on the likelihood and severity of a recession in 2023.  Most expect the US to have a shallow recession, but Europe and elsewhere could be hit harder. Most told Insider they don't expect economic growth to significantly weigh on labor markets. Executives gathered at Davos this week, with the most turbulent economic period since the global financial crisis near the top of their agendas.Insider spoke with C-suite members from groups including McKinsey, KPMG, EY, and Cisco about their outlook for the economy in 2023, and how it might affect the labor market and their businesses. Tracy Francis, McKinsey chief marketing officer"The scenario is complicated. We have an energy crisis, we have inflation, we have the specter of decoupling … but I think one of the things we are talking to clients a lot about is not talking ourselves into a recession. "An event like this has such a power to influence the level of optimism or otherwise that is out there. While we don't want to be Pollyanna about macro-economic trends, I do think there is bright sports around the world. India, Indonesia, all those kind of things that are going on that we are encouraging clients to think about, and like I said not talking ourselves into a recession."Paul Knopp, KPMG CEO"The potential recession that might occur is largely central bank-induced. I think what's really going to be worth watching is how quickly will they turn, because a central-bank-induced recession in theory would be more easily unwound than a recession that is due to fundamental things that are wrong with society and the economy."My personal view is I think that if we have a recession in the US, that there's a really good chance that could be very short and shallow. If there is one, the global picture is more complicated."Rima Qureshi, Verizon chief strategy officer"I think regardless of whether it is a recession, whether we are dealing with the inflation and how long it lasts, I think there will be a long period of uncertainty, whether it be geopolitical, economic, environmental. I think there's going to be a lot of uncertainty. "And that means it's time to really think about hunkering down and focusing on what's important, and really focusing on the fundamentals, which is what we are doing within the company."Fran Katsoudas, Cisco chief people, policy, and purpose officer"Some of the layoffs are more about cutting costs. And we've heard companies talk about the fact that perhaps during the pandemic, they over-hired. And so those layoffs are absolutely related to economic stability and growth."You have other layoffs that are actually about the transformation of companies. And I think in that situation, it is more of a skills discussion, and how do we ensure that we have what we need, as we move forward?"Andy Baldwin, EY global managing partner "The consensus view is that we appear to be moving into a recession. But I think it's important to qualify that … I think this recession is asymmetric. So yeah, we've got clearly parts of the world that are growing strongly and I think are going to continue to grow strongly, even when of the possible future recession."My own personal view is, I think we will likely see a technical recession, two quarters of negative GDP effectively, in parts of the world, most likely Europe, perhaps the US, but it doesn't feel like this is going to be a severe recession."Peggy Johnson, Magic Leap CEO "I think the economy will sustain at the level that it's at now. I don't know that it's going to get much worse, but I don't know that it's going to get much better into 2023. That's kind of my feeling."Jeff Maggioncalda, Coursera CEO"If you just read our earnings announcement and look at our results, we have seen a slowdown that occurred during 2022. Will that get worse or will that get better in 2023? We're not really super positive. Our business's three segments, historically, have been counter-cyclical."When unemployment goes up, people will get a degree because they want to be more qualified to get a more scarce job. When unemployment goes down, people are like 'I don't want to get a degree, I want to make some money'. So I think that segment will be counter-cyclical. We will do better if there's a recession – at least if there's a recession with unemployment."Becky Frankiewicz, ManpowerGroup president "There's a lot more optimism now, particularly in the labor market. So you saw the eurozone unemployment reached a historical low, the US labor market is on a 50-year low for unemployment. And so the labor markets are defying the odds of economic principles. "No one's predicting a super robust economy, but more 1% GDP growth versus negative one or 2%. And I think the labor market will probably have a very shallow impact. I think there will be impact more than we're seeing now. But I think it'll be a shallow impact."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 18th, 2023

US Layoffs Far Higher Than Suggested By Initial Jobless Claims, JOLTS

US Layoffs Far Higher Than Suggested By Initial Jobless Claims, JOLTS When it comes to labor market data (or rather "data"), Biden's labor department is a study in contrasts (and pats on shoulders). One day we get a contraction in PMI employment (both manufacturing and services), the other we get a major beat in employment. Then, one day the Household survey shows a plunge in employment (in fact, there has almost been no employment gain in the past 9 months) and a record in multiple jobholders and part-time workers, and the same day the Establishment Survey signals a spike in payrolls (mostly among waiters and bartenders). Or the day the JOLTS report shows an unexpected jump in job openings even as actual hiring slides to a two year low. Or the straw the breaks the latest trend in the labor market's back, is when the jobs report finally cracks and shows the fewest jobs added in over a year, and yet initial jobless claims tumble and reverse all recent increases despite daily news of mass layoffs across all tech companies, as the relentless barrage of conflicting data out of the BLS just won't stop, almost as if to make a very political point. But while one can certainly appreciate Biden's desire to paint the glass of US jobs as always half full, reality is starting to make a mockery of the president's gaslighting ambitions, as one by one core pillars of the administration's "strong jobs" fabulation collapse. First it was the Philadelphia Fed shockingly stating that contrary to the BLS "goalseeking" of 1.1 million jobs in Q2 2022, the US actually only added a paltry 10,000 jobs (just as the Fed unleashed an unprecedented spree of 75bps rate hikes). And now, it is Goldman's turn to make a mockery of the "curiously" low initial jobless claims, by comparing them to directly reported WARN notices which no low-level bureaucrat and Biden lackey can "seasonally adjust" because there they are: cold, hard, fact, immutable and truly representative of the underlying economic truth. So what is said truth? Before we answer that, a quick background into what a WARN notice is. As Goldman's Manuel Abecasis writes in "Introducing a Timely Measure of Economywide Layoffs Based on WARN Notices" (available to pro subs), while job openings have declined substantially without any increase in the unemployment rate so far, "a key question is whether this pattern is now changing. Press reports indicate that layoffs are rising, but they tend to overemphasize the technology sector. The official JOLTS data indicate that the economy-wide layoff rate remains low, but they are released with a lag." So, to track layoffs in a way that is both representative and timely (and not skewed by political favoritism and arbitrary and false seasonal adjustments), Goldman has collected data from advance layoff notices filed under the Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act requires companies to notify state governments and affected individuals of plans to lay off 500 or more employees (and 50 or more employees when an employment site is shut down or when the number of layoffs make up at least one-third of the company’s workforce) at least 60 days in advance. If companies fail to comply with the WARN Act, they are required to pay wages and benefits to the affected workers for the duration of the violation. Companies are exempted from the WARN notification requirement only when layoffs are the result of natural disasters or unforeseeable business circumstances, or when issuing a WARN notice would prevent a company from obtaining capital or business that would allow it to postpone or avoid a shutdown. And since many state governments upload these notices to their websites right after they are received, this allows analysts to use the data for a few large states to construct a timely measure of planned layoffs. In Exhibit 1, we use data from researchers at the Cleveland Fed to show that WARN notices for the states we cover account for most of the variation in national WARN notices. So turning to the actual data, what does it reveal. Well, as shown in the chart below, that's Goldman's recently constructed timely WARN notices measure. To account for reporting delays, the bank's economists adjusted their measure for the average number of days between when notices are dated and when they are posted on state government websites. The analysis suggests that WARN notices were well below their pre-pandemic levels between April and August of 2022 but have risen relative to the pre-pandemic seasonal norm in the last few months. The notices we have observed so far this month are consistent with a roughly 21k monthly rate for January, somewhat higher than the 19k average in 2017-2019. The next and final chart shows that WARN notices also track the JOLTS layoff rate: WARN notice counts remained elevated in late 2020 even as the layoff rate declined, but this likely reflects unusual reporting delays during the pandemic and the exclusion of layoffs at closing establishments in the JOLTS survey, which WARN notices capture provided firms remain in business. Not surprisingly, Goldman's tracking estimate based on December and January WARN notices for the large states covered not only shows that the recent drop in initial claims is unlikely, but that it is also consistent with a layoff rate of around 1.1%, higher than the 0.9% in the November JOLTS report. And while the WARN data clearly indicate that both claims and JOLTS data is misrepresenting the underlying economic reality in an overly cheerful manner, the silver lining is that the bank's findings are consistent with recent survey results from the Conference Board, which have signaled that company executives would be more reluctant to lay off workers than in typical downturns. Of course, that is all contingent on the coming recession being shallow, a concept which as we discussed before, is at best idiotic. More in the full report available to pro subs. Tyler Durden Tue, 01/17/2023 - 12:08.....»»

Category: blogSource: zerohedgeJan 17th, 2023

Recession is likely to bump inflation out of the driver"s seat for the economy — so investors should brace for uncertainty, Mohamed El-Erian says

"In this new year, recession, actual and feared, has joined inflation in the driver seat of the global economy and is likely to displace it," El-Erian said. Mohamed El-Erian, Chief economic advisor of Allianz.Lucy Nicholson/Reuters Recession is likely to replace inflation as the driver of the economy in 2023, Mohamed El-Erian said.  The global economy and investment portfolios would face a bigger range of potential outcomes, he said. The top economist warned US inflation will stay stubborn at around 4% because the Fed acted too late. Recession is likely to take the place of inflation as the driver of the global economy this year — and that means investors face more uncertainty about what could happen, top economist Mohamed El-Erian has said. Markets are bracing for an imminent economic downturn after a stream of warnings from Wall Street analysts, while the International Monetary Fund has said it expects a recession to hit one-third of the world this year."In this new year, recession, actual and feared, has joined inflation in the driver seat of the global economy and is likely to displace it," El-Erian said in a Financial Times opinion column Monday.That's going to cause unpredictability for investors, Allianz's chief economic adviser added. That would typically cause more market turbulence — something BlackRock strategists have also forecast, as they warned central bankers are unlikely to ride to the rescue as they have in the past."It's an evolution that makes the global economy and investment portfolios subject to a wider range of potential outcomes — something that a growing number of bond investors seem to realise more than many equity counterparts," El-Erian said.Tracking inflation was front and center of investors' minds in 2022, as central banks tightened monetary policy to slow the rate of price rises. In the US, the Federal Reserve acted aggressively against 40-year high inflation by hiking interest rates at the fastest pace in its history, and all three of the major US stock indexes had their worst year since 2008.But now, analysts and investors are increasingly convinced that central-bank tightening will tip the US into recession, and Bank of America among other big Wall Street banks has warned a downturn could help drive stocks down by over 20%.El-Erian, who has previously criticised the Fed for being slow to take action, said in his op-ed the rate hikes came too late to stop inflation pressures from spreading to wages and the service sector."As such, inflation is likely to remain stubborn at around 4 per cent, be less sensitive to interest rate policies and expose the economy to a higher risk of accidents induced by additional policy mistakes undermining growth," he said. The economist warned against being too complacent about the forces behind the coming economic downturn."The uncertainties facing each of these three economic areas suggest that analysts should be more cautious in assuring us that recessionary pressures will just be 'short and shallow,'" El-Erian said. "They should keep an open mind, if only to avoid repeating the mistake of prematurely dismissing inflation as transitory," he added.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 10th, 2023

Stocks have never bottomed before a recession hits, but there"s still a chance the market rallies in 2023 despite incoming economic pain, Evercore strategist says

A recession is coming, but the S&P 500 could still rebound by the end of the year, according to one Evercore strategist. Screengrab via Bloomberg A recession is headed for the economy, and stocks haven't bottomed yet, Evercore's Julian Emanuel warned. The downturn could be short and shallow, and it could be the capitulation event stocks need to rally again. He predicted the S&P 500 would rally to 4,150 by the end of the year, a 7% increase from current levels. Stocks have never bottomed before a recession, Evercore's Julian Emanuel warned – but that doesn't mean the market can't rally despite incoming economic paid. In an interview with CNBC on Thursday, Emanuel predicted a recession to arrive by mid-2023."And again, no bear market has ever bottomed before the recession started. So from that perspective, we don't think October was the bottom," he warned.His remarks come after a dismal year for stocks in 2022, with the market posting its worst losses since the Great Recession as the Fed hiked interest rates to battle sky-high inflation. Central bankers raised rates an aggressive 425-basis-points last year – and that tightening will likely continue, Emanuel said, as officials haven't seen enough evidence that the economy is slowing down.Emanuel pointed to the December jobs report, which showed the US added 223,000 payrolls last month, ahead of economists' expectations for 200,000 payrolls. That's a sign the labor market is still hot, which the Fed has cited as a reason why it needs to keep rates restrictive. Officials suggested they would continue raising rates until unemployment reached 4.7% by the end of 2023."That kind of jump in the unemployment rate, if we get there, has always catalyzed a recession," Emanuel warned. Other Wall Street analysts expect a recession to hit the economy next year and ravage the stock market, with Bank of America, Morgan Stanley, and Deutsche Bank forecasting a 20%-25% crash in the S&P 500 in the first half of the year. That will largely be spurred by downbeat corporate earnings, Morgan Stanley said, estimating that earnings expectations for 2023 were still about 20% too high.But despite recession headwinds, the S&P 500 could still rally to 4,150 by the end of the year, Emanuel said, which would be a 7% increase from current levels. He predicted the recession would be shallow and "shortish," and likely allow the market to fully recapitulate. That could be the event needed for stocks to flourish, despite downbeat corporate earnings that many are predicting this year."You get that kind of activity in the market, a catharsis, a volatility spike, that clears the way for in fact, the type of year we expect: where earnings are going to be down, but the market's up. And the thinking is that that is atypical. It's actually very typical. That's what we expect," he said.The success of stocks this year will hinge on inflation continuing to fall, though Emanuel expects prices to cool to 3% this year. Prices have already slowed to 7.1% as of November, with St. Louis Fed President Jim Bullard suggesting the Fed would issue two more rate hikes before pausing its inflation-fighting efforts.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 6th, 2023

What Will This Mean For The Devon Energy Stock Price This Year?

Devon Energy may benefit from higher oil and natural gas prices this year However, the extent of the incoming recession is unknown Much of the world’s economy hinges on China’s reopening and economic recovery China recently indicated that it will spend $1 trillion dollars in infrastructure spending to get things moving again 5 stocks we […] Devon Energy may benefit from higher oil and natural gas prices this year However, the extent of the incoming recession is unknown Much of the world’s economy hinges on China’s reopening and economic recovery China recently indicated that it will spend $1 trillion dollars in infrastructure spending to get things moving again 5 stocks we like better than Devon Energy Devon Energy (NYSE:DVN) is poised to benefit from a couple of tailwinds for its gas and oil commodities this year. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. These tailwinds also coincide with Wall Street's estimation of the stock's performance in the foreseeable future. The stock is rated as a moderate buy, and according to the MarketBeat consensus price target, it has a 37.7% potential upside at the time of writing. Furthermore, the company is expected to receive a slight bump in earnings. It's believed Devon Energy's earnings per share (EPS) will grow 1.96% from $8.66 to $8.83 per share. So let's examine the headwinds that may propel Devon's Energy stock in 2023. Higher Crude Oil Prices Global energy prices are set to increase this year, and crude oil is expected to come out on top. This is according to a report published by UBS Group (NYSE: UBS) earlier this week. A few key catalysts will drive the prices of energy commodities. These include China's reopening, increased demand from developing economies such as India, and upstream constrictions on Russia's oil production from the EU. The bottom line is that UBS expects oil prices to increase to USD 100/bbl in the near future and expects Brent crude to peak at around USD 110/bbl near the middle of this year. Putting this forecast in perspective, the price of WTI crude is currently $78.05 at the time of writing. This means UBS is expecting a 40.93% upside, with the commodity making an average price gain of around 6.5% per month to get there. But China Is The Wildcard However, one significant assumption is being made with this forecast: there will be only a shallow global recession. If the recession is deep, as some experts suggest, then Brent crude could see an average price of only $89.37 a barrel throughout the year. A basic summary of this argument is that the world's economic centers, which include China, Europe, and the United States, could enter a recession simultaneously, which will be the first time in forty years. The world's demand for key commodities such as oil and steel mostly hinges on China's domestic consumption. One play China has made in the past when facing an economic crisis is to rapidly increase spending on infrastructure. This is how China insulted its economy during the global financial crisis in 2007-2008, buoying major export economies such as Australia. How China responds in the first quarter after reopening may be the deciding watershed moment for the oil outlook this year and how deep the recession will run internationally. In August, China said it would commit one trillion dollars towards building out its infrastructure projects, per Bloomberg, so that it may return to its old playbook. Natural Gas To Rise The other half of Devon Energy's products are in natural gas, which is expected to make a comeback, according to Capital.com. The commodity slipped from a high of $9/MMBtu in August last year and has since fallen to around $3.7/MMBtu at the time of writing. After the market recovered from supply shocks and tapered off from the US's increased LNG exports, the commodity price has been in a free fall. However, the most profitable time of year for natural gas exports is just after the winter in Europe has ended, which will be near the end of the first quarter of 2023. This will be when Europe is expected to replenish its natural gas reverses and may lead to a significant uptick in demand for the commodity. By analyzing the market's response to its support and resistance zones, a commodity price between $5 and $8 seems likely, the article said. Another factor that will play a part is how cold the incoming winter will be. Cold winters will mean more gas will be used, thus commanding a higher commodity price, while a warmer winter will keep more gas in the coffers. Should you invest $1,000 in Devon Energy right now? Before you consider Devon Energy, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Devon Energy wasn't on the list. While Devon Energy currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Matthew North, MarketBeat.....»»

Category: blogSource: valuewalkJan 5th, 2023

Oil will jump 28% in 2023, with another energy crunch set to push prices higher, Eurasia Group says

Oil demand will grow as China recovers after ditching strict COVID policies, and the US undergoes only a shallow recession, says Eurasia Group. Andrew Burton/Getty Images Oil prices will rise above $100 a barrel in 2023, according to a projection in the Eurasia Group's top risks of the year.  Oil demand looks poised to grow as China recovers quickly after backing off zero-COVID polices and the US experiences only a shallow recession.  Brent and WTI crude prices recently traded below $78 a barrel each.  Oil prices will spring back above $100 a barrel in 2023 as tight supply meets growing demand, the political research and consultancy firm Eurasia Group said in its list of top risks this year. That would represent a 28% increase in the price of international benchmark Brent crude, which traded around $77.90 a barrel on Wednesday. Calculating for West Texas Intermediate crude, the increase would be 37% from $72.80 a barrel. The oil market is poised to experience shocks this year on the back of a faster-than-expected economic recovery in China after the country's sudden exit from zero-COVID policies along with a shallow recession in the US that won't sink demand, wrote Ian Bremmer, president and founder of Eurasia Group, and Cliff Kupchan, the firm's chairman and head of global macro coverage. They said those two factors would bolster demand growth for crude oil and expose an acute lack of new supply. "Contributing to the problem are Russian production declines amid continued sanctions, low levels of OPEC+ spare capacity, reduced capital investment in non-OPEC production, and the absence of an Iran nuclear deal," said the firm, noting that the lack of such a nuclear agreement is also on its list of risks.  Tensions are likely to rise between OPEC+ and global consumers — led by the US — as the oil cartel wants to protect a price floor of about $90 per barrel for Brent, which is at odds with the lower prices for oil that consumers want.   "Higher prices will prompt the US to intervene directly in markets and punish moves by oil-producing states it sees as (at least partially) politically motivated," Eurasia Group projected. Meanwhile, US natural gas prices will go up and "feel the strain" from the European Union's need to rebuild gas storage from the second quarter of this year in the absence of cheap Russian supplies.China's economic recovery and increased global demand for liquefied natural gas will likely drive US natural gas prices closer to $8 per million British thermal units or more.Last year, natural gas topped $8 as European demand fed US price gains. They have since tumbled amid unseasonably warm weather and traded around $4.056 on Wednesday. "In short, the respite in energy markets this winter will be temporary – the eye of the hurricane before a renewed energy crunch adds to pressure on consumers, puts fiscal strain on governments, and deepens divides between developed and developing nations and the United States and Gulf countries," wrote Bremmer and Kupchan.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 4th, 2023

S&P 500 – Budding Sign Not To Miss

After a sour Dec of no Santa Claus rally, S&P 500 is readying a nice Jan move – and I say it would be up. Value hasn‘t retreated deeply while tech is getting ready for a reflexive bounce when it can keep pace with better sectoral picks in the first week of 2023. Let‘s bring […] After a sour Dec of no Santa Claus rally, S&P 500 is readying a nice Jan move – and I say it would be up. Value hasn‘t retreated deeply while tech is getting ready for a reflexive bounce when it can keep pace with better sectoral picks in the first week of 2023. Let‘s bring up Thursday‘s super extensive analysis – I hope you didn‘t miss the yearly recap and outlook inside such as: (…) True, inflation has peaked, but I had been telling you earlier in summer that it‘s going to be sticky and stubborn, better to expect only a shallow retreat that would go painfully slow. And PPI incl. core data show that‘s still the case, with more inflation in the pipeline. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2022 hedge fund letters, conferences and more   The Fed has been and will be forced to take Fed funds rate restrictive, and the figure wouldn‘t be 5%, but rather 5.50% - if they get there before breaking the real economy, which I doubt they would be able to avoid. Actually, it‘s the hopes of tightening breaking something far away that would force the Fed to pivot without any real damage washing across the U.S. shores, that forms the Moynihan bullish case for stocks which I argued and refuted some two weeks ago. The Fed is going to be frustrated by persistent inflation, commodities retreating no more, and both hot job market with wage inflation running hot, participation rate turning lower (not only for males), and unemployment claims slowly trending up. We‘ll continue witnessing cost-push inflation combined with tight labor market – and it would be crude oil‘s time again to gain in value from current levels. I think that apart from long-term share purchases slated for the start of the year, it‘ll be Jan 2023 inflation data would be the catalyst for stock market‘s good month, whereby we would make a peak, quite consistently with the 3rd Presidential cycle year pattern. Remember, all of the above is set to squeeze profit margins, leading to lower earnings and guidance. Similarly on the non-corporate front, the consumer confidence data would turn south after the Dec outperformance, which would then reflect upon retail sales, worsening credit and deliquencies. If in doubt, have a look at e.g. used car prices, which were also one of the key drivers of retreating inflation lately. Yes, the consumer is going to get squeezed as well, it‘s not just about deflating housing and sharply going down manufacturing as recent data have shown. Notably, I‘m not arguing for a housing crash, but for a solid, long lasting (18 months?) and well managed (by the Fed as housing is the first leading indicator to get changing nominal rates – and of course mortgage rates, which have bottomed quite a while ago already, worldwide) retreat in peak to through housing values of say 20%. So, we‘re firmly on the countdown to recession, which is in several sectors already here, but will strike with full force in 1H 2023. Yes, it‘s the coming six months that would illustrate in stocks what we have seen internationally in bonds – just compare the magnitude of retreat in U.S. yields to that seen in European bonds or UK gilts. Have a look at lumber, home sales or housing starts taking it on the chin if you doubt the housing market‘s direction. This time, the Fed doesn‘t have your back, and is willing to (over)tighten. Have a look at the dollar, at how it‘s been unable to catch a bid even as the Fed & co killed the bond market rally in mid Dec. Financial conditions have also eased last month, working against the greenback. While USD may finally stage a relief rally in Jan for instance on the still hot inflation, it would though remain under strategic defensive throughout the year as the Fed‘s tightening pace and leadership in setting the pace, goes away. Actually, we might be looking at the opening shot in the USD rally provided that the greenback keeps above first 104, then 104.80. Have a look at real assets during the 2022 times of rising USD – and just imagine what these would do when the dollar fails to catch (very solid) breath later in the year. Talk about decreasing sensitivity late in the tightening cycle, coupled with the the upcoming recession that would take yields down in the second half of 2023. Soft landing is the only thing that would preclude retreat in yields, and we know how likely is that to occur… LEIs don‘t lie. I‘ll conclude by saying the bond market doesn‘t believe in soft landing one bit. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock. So, make sure you‘re signed up for the free newsletter and that you have my Twitter profile open with notifications on so as not to miss a thing, and to benefit from extra intraday calls. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook 3,810s are the support zone which I don‘t look for to be broken – conversely, 3,875 would be overcome early in the week. XLV, XLF, XLI and XLB with XLE are likely to do well while XLK wouldn‘t stand much in the way. Credit Markets Encouraging signs from corporate junk bonds – stocks are likely to get a tailwind to open 2023. Let‘s now break above $73.75 in HYG. Thank you for having read today‘s free analysis, which is a small part of my site‘s daily premium Monica's Trading Signals covering all the markets you're used to (stocks, bonds, gold, silver, miners, oil, copper, cryptos), and of the daily premium Monica's Stock Signals presenting stocks and bonds only. Both publications feature real-time trade calls and intraday updates. While at my site, you can subscribe to the free Monica‘s Insider Club for instant publishing notifications and other content useful for making your own trade moves. Turn notifications on, and have my Twitter profile (tweets only) opened in a fresh tab so as not to miss a thing – such as extra intraday opportunities. Thanks for all your support that makes this great ride possible! Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice......»»

Category: blogSource: valuewalkJan 4th, 2023

Watch Bank of America (BAC) Despite Recession Risk in 2023

Despite the looming recession threat, one must keep Bank of America (BAC) stock on the radar, given the strong fundamentals and solid prospects on rising interest rates. Per a poll conducted by Reuters in early December 2022, economists are expecting “a short and shallow recession” in 2023, along with more interest rate hikes. At present, the benchmark interest rates are at a 15-year high range of 4.25-4.50%, and the Federal Reserve is projecting at least another 75 basis points (bps) hike, with the same peaking at 5.1% by the end of this year.The year 2022 was a turbulent one for the U.S. markets, marked by “persistent” inflation and the central bank’s ultra-aggressive monetary policy, along with geopolitical and supply-chain headwinds. The S&P 500 Index clocked the worst performance since the 2008 financial crisis, with the Nasdaq and the Dow Jones trading in the bear market. Except for energy, all the 10 S&P 500 sectors ended in the red. Even the Financial Services sector, which usually benefits from higher rates, lost 10.6% last year.Amid such a grim scenario, investors must look for stocks that are fundamentally well-placed and will continue to thrive once the current headwinds cool off. Today we are discussing one of the largest banks in the United States — Bank of America BAC.Banks are highly vulnerable to loan losses when an economic slowdown arises. But things are different this time. Even if the U.S. dips into “mild” recession, it would be unlike any in the past. While the central bank had come to Wall Street's rescue through monetary policy easing in the past, this time, it has no option but to aggressively raise interest rates.As the rates rise, the banking industry benefits from the same. Among the large banks like Wells Fargo WFC, JPMorgan JPM and Citigroup C, Bank of America is the most interest rate sensitive. The company’s net interest income (NII) jumped 20% on year-over-year basis for the nine months ended Sep 30, 2022, supported by robust loan growth.Management expects NII in the fourth quarter of 2022 to be at least $1.25 billion higher than the third-quarter level. Also, BAC projects an additional $4.2 billion rise in NII if there's a 100-bps parallel shift in the interest rate yield curve over the next 12 months. The Fed has already moved another 125 bps following the release of the company’s third-quarter results. Hence, the solid boost in the company’s NII will more than offset the increasing loan losses and help earnings growth even through the imminent recession.Shares of this Zacks Rank #3 (Hold) company plunged 25.5% in 2022, which is more than the S&P 500’s decline of 20.7%. This provides an attractive entry point for investors in a quality franchise. The stock’s performance was also worse than Wells Fargo, JPMorgan and Citigroup, which lost 13.9%, 15.3% and 25.1%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Price Performance in 2022 Image Source: Zacks Investment ResearchApart from above-mentioned tailwinds, Bank of America will continue to reap the benefits of its digitization initiatives. Digital transactions are substantially cheaper for banks than in-person interactions. BAC has grown the number of active digital users to approximately 43.5 million since 2019. As the customers shift toward digital banking, the company can capitalize on the same by consolidating its branch network (which is down almost 7% year over year as of Sep 30) and reduce non-interest expenses.Prudent cost management has been supporting the bank’s financials too. Its expense-saving plan — Project New BAC (launched in 2011) — helped improve the overall efficiency. The bank has been incurring $15 billion (on average) in operating expenses on a quarterly basis despite undertaking several strategic growth efforts. For 2022, management anticipates expenses to be $61 billion, which includes the cost related to the resolution of regulatory and litigation matters. Excluding this, expenses are expected to be a little more than $60 billion compared with $59.7 billion incurred in 2021.Bank of America has a steady capital deployment plan. Post the clearance of the 2022 stress test, BAC hiked the quarterly dividend by 5% to 22 cents per share. Prior to this, the company had announced a 17% hike to its quarterly dividend in July 2021. Based on last day’s closing price of $33.51, BAC’s dividend yield currently stands at 2.63%. Bank of America Corporation Dividend Yield (TTM) Bank of America Corporation dividend-yield-ttm | Bank of America Corporation QuoteFurther, in October 2021, the company's share repurchase plan of $25 billion was renewed (replacing the April 2021 authorization). As of Sep 30, 2022, $15.95 billion worth of shares were left to be repurchased. Given the strong balance sheet and earnings strength, the company will be able to sustain enhanced capital deployments.Therefore, Bank of America stock seems well-placed to counter the impending recession in 2023. Additionally, at $33.51 per share, the stock is currently trading at a price/tangible book value of 1.60X, way below the Zacks Finance sector average of 4.55X. Thus, the attractive valuation might be a good entry point for investors. Price-to-Tangible Book Ratio (TTM)Image Source: Zacks Investment ResearchParting ViewsConsidering Bank of America’s growth prospects and robust fundamentals, investors must watch the stock for long-term gains. The company’s efforts to improve revenues, strong balance sheet and liquidity positions and expansion into new markets will keep supporting its financials. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksJan 4th, 2023

11 Ominous Predictions For 2023

11 Ominous Predictions For 2023 Authored by Michael Snyder via The Economic Collapse blog, There is a growing consensus that 2023 is going to be a miserable year for the U.S. economy and for the global economy as a whole.  In fact, in all the years that I have been writing I have never seen so many big names on Wall Street be so incredibly pessimistic about the coming year.  Of course much of that pessimism is due to the fact that 2022 went so poorly.  The cryptocurrency industry imploded, trillions of dollars in stock market wealth evaporated, inflation became a major problem all over the industrialized world, and a new housing crash suddenly erupted.  Considering all of the pain that we have experienced over the past 12 months, it is only natural for the experts to have a negative view of 2023.  The following are 11 ominous warnings that they have issued for the year ahead… #1 The IMF: “We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people” #2 Bloomberg: “Economists say there is a 7-in-10 likelihood that the US economy will sink into a recession next year, slashing demand forecasts and trimming inflation projections in the wake of massive interest-rate hikes by the Federal Reserve.” #3 The World Bank: “As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.” #4 Bank of America CEO Brian Moynihan: “We’re going to have a shallow recession” #5 Mohamed El-Erian: “Many ‘high-conviction’ U.S. recession calls are immediately coupled with the assertion that it’ll be ‘short and shallow.’ Reminds me of the behavioral trap ‘transitory inflation’ proponents fell into last year” #6 Nouriel Roubini: “No, this is not going to be a short and shallow recession, it’s going to be deep and protracted” #7 Larry Summers: “My sense is that it’s much harder than many people think to achieve a soft landing” #8 Goldman Sachs CEO David Solomon: “Economic growth is slowing,” Goldman Sachs CEO David Solomon said at the same conference. “When I talk to our clients, they sound extremely cautious.” #9 Charles Schwab & Co.’s Liz Ann Sonders: “We have to take our medicine still, meaning a weaker economy and a weaker labor market. The question is, is it better to take our medicine sooner or later?” #10 BlackRock: “Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. They are deliberately causing recessions by overtightening policy to try to rein in inflation” #11 Michael Burry: “Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.” As you can see, there is a general consensus that things will be bad in 2023, but there is disagreement about just how deep the coming economic downturn will turn out to be. If the worst of these forecasts turn out to be accurate, that will actually be incredibly good news. Because the reality of what we will be facing in 2023 is likely to be significantly worse than any of these experts are currently projecting. With each passing day, we continue to get even more numbers that indicate that big trouble is ahead. For example, we just learned that luxury home sales absolutely cratered during the months of September, October and November… Sales of luxury homes fell 38.1% year over year during the three months ending November 30, 2022, the biggest decline on record, according to a new report from Redfin, a technology-powered real estate brokerage. That outpaced the record 31.4% decline in sales of non-luxury homes. Redfin’s data goes back to 2012. The luxury market and the overall housing market lost momentum in 2022 due to many of the same factors: inflation, relatively high interest rates, a sagging stock market and recession fears. We haven’t seen anything like this since 2008. And we all remember what the housing crash of 2008 ultimately did to the financial markets. Normally, the beginning of a calendar year is a time for optimism.  As we look forward to a completely clean slate, it can be easy to forget the difficulties of the previous 12 months. But this year things seem completely different. On some level, just about everyone can feel that very challenging times are ahead of us. Decades of very foolish decisions are starting to catch up with us in a major way. Our leaders tried very hard to keep the party going for as long as possible, and to a certain extent they were quite successful in doing so. Our politicians in Washington kept borrowing and spending trillions upon trillions of dollars that we did not have, and that definitely delayed our day of reckoning. And the Federal Reserve kept the financial markets artificially propped up for years by endlessly pumping giant mountains of fresh cash into the system. But such foolish measures only made our long-term problems even worse, and now our leaders are losing control. All of the “mega-bubbles” are starting to burst, and the system is beginning to fall apart all around us. It is time to turn out the lights, because the party is over. We all had a lot of fun while it lasted, but now the bill is due and an extraordinary amount of pain is ahead. *  *  * It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon. Tyler Durden Tue, 01/03/2023 - 16:20.....»»

Category: personnelSource: nytJan 3rd, 2023

The Year In Review And Ahead

S&P 500 still didn‘t catch second breath since giving up the (for some but not for you, my readers) sharp Dec CPI gains, and getting finished by Powell and the tightening spree continuation around the world (ECB, BoE, SNB) – dashing all hopes of Santa Claus rally. Similarly the BoJ admissible rates move didn‘t help. […] S&P 500 still didn‘t catch second breath since giving up the (for some but not for you, my readers) sharp Dec CPI gains, and getting finished by Powell and the tightening spree continuation around the world (ECB, BoE, SNB) – dashing all hopes of Santa Claus rally. Similarly the BoJ admissible rates move didn‘t help. Today‘s analysis is going to be a very special one as I‘ll concentrate on the key 2022 developments shaping up the investing and trading landscape of 2023 – across the many markets on my watch, all naturally intertwined with macroeconomics and economic policy notes. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2022 hedge fund letters, conferences and more   True, inflation has peaked, but I had been telling you earlier in summer that it‘s going to be sticky and stubborn, better to expect only a shallow retreat that would go painfully slow. And PPI incl. core data show that‘s still the case, with more inflation in the pipeline. The Fed has been and will be forced to take Fed funds rate restrictive, and the figure wouldn‘t be 5%, but rather 5.50% - if they get there before breaking the real economy, which I doubt they would be able to avoid. Actually, it‘s the hopes of tightening breaking something far away that would force the Fed to pivot without any real damage washing across the U.S. shores, that forms the Moynihan bullish case for stocks which I argued and refuted some two weeks ago. The Fed is going to be frustrated by persistent inflation, commodities retreating no more, and both hot job market with wage inflation running hot, participation rate turning lower (not only for males), and unemployment claims slowly trending up. We‘ll continue witnessing cost-push inflation combined with tight labor market – and it would be crude oil‘s time again to gain in value from current levels. I think that apart from long-term share purchases slated for the start of the year, it‘ll be Jan 2023 inflation data would be the catalyst for stock market‘s good month, whereby we would make a peak, quite consistently with the 3rd Presidential cycle year pattern. Remember, all of the above is set to squeeze profit margins, leading to lower earnings and guidance. Similarly on the non-corporate front, the consumer confidence data would turn south after the Dec outperformance, which would then reflect upon retail sales, worsening credit and deliquencies. If in doubt, have a look at e.g. used car prices, which were also one of the key drivers of retreating inflation lately. Yes, the consumer is going to get squeezed as well, it‘s not just about deflating housing and sharply going down manufacturing as recent data have shown. Notably, I‘m not arguing for a housing crash, but for a solid, long lasting (18 months?) and well managed (by the Fed as housing is the first leading indicator to get changing nominal rates – and of course mortgage rates, which have bottomed quite a while ago already, worldwide) retreat in peak to through housing values of say 20%. So, we‘re firmly on the countdown to recession, which is in several sectors already here, but will strike with full force in 1H 2023. Yes, it‘s the coming six months that would illustrate in stocks what we have seen internationally in bonds – just compare the magnitude of retreat in U.S. yields to that seen in European bonds or UK gilts. Have a look at lumber, home sales or housing starts taking it on the chin if you doubt the housing market‘s direction. This time, the Fed doesn‘t have your back, and is willing to (over)tighten. See again my extensive early Dec analysis where I talked tightening into a slowing economy, and especially the balance sheet operations – $90bn a month being retired while the foreigners have largely stepped away from rotating trading surpluses into Treasuries, now that those surpluses are gone (Europe, Japan). With the Fed away, who is going to step in, and at what price? Just as the persistent and on par for record books yield curve inversion (flashing red hot about the approaching recession for a long time already), yields are to continue trending higher, putting extra pressures on the corporate front (the cost of capital cutting into profits). For now, higher yields aren‘t an issue for the Treasury as only $2T needs to be rolled over every year, roughly speaking. If though 4 or 5 years down the road yields were to remain this high, that would be a problem. Remember that we‘re in the era of end of cheap labor, end of cheap energy, and end of cheap goods – and that it takes on average 10 years to change the secular characteristics of inflation. The Fed has a long, long way to go – and I‘m seeing plenty of headwinds to take down risk assets beyond what I already mentioned – see reverse repos and banking reserves coupled with Treasury issuing much fresh debt. Not good for stocks or bonds – not at all good. And you can see it perfectly in junk corporate bonds and Treasuries suffering as the Fed had killed the bond market rally in Dec. 60/40 is dead, and 2023 would bring fresh troubles for both. You can hide in cash, seeing it eaten away by inflation – and anticipate good buying opportunities (the market of pickers) when there is blood in the streets, or take a more active approach. What are then the best themes for 2023? (…) I continue being bullish on silver with gold incl. miners, energy ranging from oil to renewables to nuclear, agriculture (incl. fertilizers, $DE), defence sector with aerospace ($BA etc). These will benefit during the increased volatility and sticky inflation to be with us in 2023 and beyond. Sectorally, healthcare wouldn‘t do that bad ($XLV, $XBI) and my pick from months ago, $LLY, continues doing great. I‘m also bullish oil stocks ($XOM, $SLB), copper, nickel, lithium, cobalt. This is the decade of resources, necessities of life, precious metals and disruptive technologies while general Nasdaq troubles are to continue. Just check the Nasdaq to oil ratio for clarity. Circling back to bonds, hear not only the repercussions on yen carry trade (the dreaded unwinds) , but also what the 2-year yield is telling the Fed – you‘re done tightening, if you do more, things will start to break. See again my latest extensive pre Christmas article where not only the above, but the deceptive picture of strength in the job market that the Fed is relying on. However, there is none as: (…) the differential between Establishment and Household surveys continues to widen, now standing at 2.7 million jobs (Nov 2022), be it thanks to full time, part time or multiple job holders, or the birth-death model. For all the labor market tightness, and the categories seeing gains (sectorally not representing a picture of strength, but rather teetering on the brink of recession), the Fed is in my view relying on a deceptive picture of strength in the job market when the opposite is slowly becoming the truth. We‘re though going to have a great year! I hope you enjoyed not only that tweet, but also Merry Christmas wishes – that you had spent those days accordingly. To the future which I‘m looking forward for serving you all! Thank you for having read today‘s free analysis, which is a small part of my site‘s daily premium Monica's Trading Signals covering all the markets you're used to (stocks, bonds, gold, silver, miners, oil, copper, cryptos), and of the daily premium Monica's Stock Signals presenting stocks and bonds only. Both publications feature real-time trade calls and intraday updates. While at my site, you can subscribe to the free Monica‘s Insider Club for instant publishing notifications and other content useful for making your own trade moves. Turn notifications on, and have my Twitter profile (tweets only) opened in a fresh tab so as not to miss a thing – such as extra intraday opportunities. Thanks for all your support that makes this great ride possible! Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice......»»

Category: blogSource: valuewalkDec 30th, 2022

3 Promising Bank Stocks as Recession Threat Looms in 2023

Amid expectations of moderate recession in 2023, banks like First BanCorp (FBP), Fulton Financial (FULT) and First Citizens (FCNCA) look promising on higher interest rates and earnings prospects. Heading into 2023, the questions that come to our mind are whether the inflation will cool down enough for the central banks to stop raising rates and whether there will be an economic slowdown. Per a poll conducted by Reuters, economists are expecting “a short and shallow recession over the coming year.”This situation will be like a double-edged sword for the banking industry. While a higher interest rate regime (the Federal Reserve is projecting at least another 75 basis points of rate hike, peaking at 5.1% by the end of 2023) will continue to support net interest income (NII), an economic slowdown/recession will lead to gradual weakening of loan demand. If you thought that 2022 was tough for banks, 2023 will bring more challenges.In the year-to-date period, the S&P Banks Select Industry Index has declined 19%, while the KBW Nasdaq Bank Index is down 26.8%. Almost all banks have lost value this year, making their shares all the more attractive. But you must be careful while selecting bank stocks for your portfolio so that you don’t fall into the value trap. So, we have picked three banks — First BanCorp. FBP, Fulton Financial Corporation FULT and First Citizens BancShares, Inc. FCNCA — that have solid prospects for 2023 despite the headwinds.Turbulent 2022: A Short ReviewThe year started on a positive note, with the Fed ending the low-interest rate environment (at present, the benchmark interest rates are at a 15-year high range of 4.25-4.50%) to control persistent inflation. After two years of COVID-related mayhem and ambiguity, the lending scenario improved markedly as the economy opened up. This, along with initiatives taken to support fee income, majorly supported banks’ top line.But as the year progressed, several macroeconomic and geopolitical matters, including global supply-chain disruptions, rising COVID cases in many nations and the ongoing Russia-Ukraine conflict, dampened investors’ confidence. Also, as inflation turned out to be more “sticky” than expected, the Fed was forced to take unprecedented measures to tackle the same.Driven by rising interest rates and robust “broad-based” loan growth, the FDIC-insured banks posted a solid 16.5% year-over-year increase in NII for the first three quarters of 2022. As the operating backdrop turned tough, growth in non-interest income was modest. Further, with the economic outlook deteriorating, banks started building reserves to tide over a probable rise in delinquencies. For the first nine months of the year, the provision for credit losses was $30.9 billion against a provision benefit of $30.4 billion in the corresponding period last year.As you can see, the situation is gradually turning grim for banks. The reserve built has been adversely impacting banks’ bottom-line performance. The FDIC-insured banks recorded a 9.4% year-over-year decline in net income in the first three quarters of 2022.While we will have to wait till mid-January 2023 to get the actual fourth-quarter and full-year 2022 picture as bank earnings start, the situation is likely to have turned more challenging.3 Bank Stocks Worth Betting on for 2023As you can see, the operating environment will not be ideal for banks in 2023, making it difficult to select stocks for solid returns. So, we have taken the help of the Zacks Stock Screener to shortlist the abovementioned stocks. These stocks currently have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Further, these banks have a market cap of $2 billion or more and are expected to witness earnings growth in both 2022 and 2023. Also, these stocks have a Value Score of A or B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential. Year-to-Date Price Performance Image Source: Zacks Investment ResearchFirst BanCorp: San Juan, PR-based First BanCorp provides various financial services for retail, commercial, and institutional clients. FBP operates more than 60 branches in Puerto Rico, approximately eight branches in the U.S. Virgin Islands and British Virgin Islands, and almost 10 branches in the state of Florida.First BanCorp’s asset-sensitive position will benefit largely from the rising rate environment. Its strong lending pipeline and strategic asset growth are expected to contribute to NII improvement.FBP, with a market cap of $2.4 billion, has lost 6.9% so far this year. The company’s earnings are projected to witness a year-over-year rise of 15.7% for 2022 and 9.9% for 2023. The company currently has a Value Score of A.Fulton Financial: Headquartered in Lancaster, PA, Fulton Financial is a multi-bank financial holding company that provides banking and financial services to businesses and consumers. FULT operates through nearly 200 financial centers across Pennsylvania, New Jersey, Maryland, Delaware and Virginia.Driven by a solid balance sheet position, Fulton Financial is expected to continue pursuing acquisitions. In July 2022, it acquired Prudential Bancorp, Inc., which will be accretive to earnings in the upcoming period. This, along with rising interest rates, efforts to bolster fee income and decent loan demand, will continue to support financials.The bank has a market cap of $2.9 billion. FULT’s earnings for 2022 and 2023 are projected to witness a rise of 10.5% and 7.1%, respectively. So far this year, the stock has gained 0.5%. The stock has a Value Score of B.First Citizens: Headquartered in Raleigh, NC, First Citizens is a Delaware financial holding company, with more than $100 billion in assets and roughly 550 branches in 22 states. In January 2022, First Citizens and CIT Group Inc. merged, leading to the formation of one of the top 20 U.S. financial institutions.Given the synergies from the CIT Group deal, rising interest rates and improvement in demand for loans, First Citizens’ top line is expected to continue improving in the quarters ahead. Further, the company has a robust liquidity position.Shares of FCNCA, which has a market cap of $10.8 billion, have lost 9.4% in the year-to-date period. For 2022, the company’s earnings are projected to witness a year-over-year surge of 47.3%. For 2023, earnings are expected to jump 23.4%. The stock has a Value Score of B. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report First Citizens BancShares, Inc. (FCNCA): Free Stock Analysis Report Fulton Financial Corporation (FULT): Free Stock Analysis Report First BanCorp. (FBP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 27th, 2022

The 10 biggest losers in the S&P 500 this year have seen $1.6 trillion in market value erased

Meta, Tesla, and PayPal are among the 10 worst performers on the S&P 500 in what's been a bruising 2022 for the US stock market. Traders work on the floor of the NYSE.Thomson Reuters In a losing year for US stocks, here are the 10 biggest percentage decliners on the S&P 500.  Meta, Tesla, and Match made the cut as their shares veered toward losses of more than 60% each.  The 10 largest S&P 500 stock losers wiped out $1.6 trillion in market value.  Equity investors are no doubt eager to usher out 2022 after a turbulent year of sharp losses.Shaped greatly by Russia's war in Ukraine and central banks responding to soaring inflation with massive rate hikes, the relatively risky asset class was dragged into a bear market. The S&P 500 was on course to fall about 20%, and the Nasdaq Composite was looking at a decline of more than 30%. Looking at the carnage another way, about 70% of companies on the S&P 500 were logging negative returns as 2022 wraps up. Large-cap tech stocks including Apple and Amazon were beaten down as higher borrowing costs weigh on the value of future profits. With recession fears ramping up, high-profile tech companies including Meta and Microsoft combined have laid off thousands of workers. The 10 S&P 500 companies that have experienced the largest stock-price declines heading into the end of 2022 have wiped out a combined market value of more than $1.6 trillion.Here are the benchmark index's 10 biggest losers in 2022 on a percentage basis. 10. PayPal The interface of the PayPal app's new rewards section.PayPalTicker: PYPL YTD Performance: -63.4%Market Value Decline: $142.49 billionLike many tech companies, the digital payments processor is seeing a slowdown after a pandemic boom. Net new accounts in the third quarter increased by 2.9 million compared with 13.3 million in the year-ago period. CEO Dan Schulman told analysts the macro environment looks difficult in part with inflationary pressures in Europe and in the US, and a potentially shallow recession in the US. The shares popped higher earlier in December, however, after Schulman reportedly said fourth-quarter per-share earnings were tracking "slightly ahead" of its expectations. 9. V.F. Corp. BackcountryTicker: VFC YTD Performance: - 64.4%Market Value Decline: $18.6 billionThe company behind The North Face, Supreme, Vans and other apparel labels rounded off a rough year for its stock with the unexpected departure of Steve Randle as CEO. The Denver-based company said this year it's been navigating through a "more disrupted global marketplace," pockmarked by COVID-related issues in China and consumers facing economic uncertainty.8. Signature Bank 2022 stock chart of Signature Bank's share-price performance.InsiderTicker: SBNY YTD Performance: -64.5%Market Value Decline: $12.4 billion"We are not just a crypto bank and we want that to come across loud and clear," CEO Joe DePaolo reportedly said at a Goldman Sachs investor conference this month. The bank's shares have been hit as the so-called crypto winter has slashed the cryptocurrency market's value from its high of more than $1 trillion and crypto deposits at the bank have declined. Signature anounced plans to reduce crypto-related deposits by $8 billion to $10 billion. The stock did rise on the mid-November day that Signature said its deposit relationship with collapsed crypto exchange FTX was less than 0.1% of its overall deposits.7. Meta PlatformsMark Zuckerberg at Facebook's first ever Meta StoreFacebook/MetaTicker: METAYTD Performance: -64.9%Market Value Decline: $611.17 billionInvestors have largely pushed back on CEO and major shareholder Mark Zuckerberg's metaverse ambitions that led to the company's rebranding from Facebook last year. Its Reality Labs unit centered on virtual-world technology has lost nearly $20 billion since last year. One prominent investor has called on Meta to cut back on its Reality Labs investment.  Well aware of the backlash, Zuckerberg recently said 80% of Meta's investments are still directed to its core social media business. The drop in Meta's valuation has sliced more than $80 billion off of Zuckerberg's vast wealth, which recently stood at more than $44 billion.6. Tesla Nora Tam/South China Morning Post via Getty ImagesTicker: TSLA YTD Performance: -65%Market Value Decline: $703.12 billionThe pummeling of the EV maker's stock price this year knocked CEO Elon Musk from his perch as the world's richest man. A few forces were at work here: Musk himself blames the Federal Reserve for driving down Tesla's valuation, saying its aggressive rate hikes have pushed up US Treasury bond yields, boosting the appeal of that low-risk debt over relatively riskier assets. Meanwhile, some investors and analysts say Tesla has been hurt by Musk's sales of billions of dollars worth of  Tesla shares and his focus on Twitter after his controversial $44 billion acquisition of the social media site in October. Supply chain problems in China have also been a pressure point although the company has been able to log record monthly sales during 2022. For those watching Musk's net worth, it's fallen by more than $130 billion on the Bloomberg Billionaires Index. 5. Catalent A laboratory technicians handles vials as part of filling and packaging tests for the large-scale production and supply of the University of Oxfords COVID-19 vaccine candidate, AZD1222, conducted on a high-performance aseptic vial filling line on September 11, 2020 at the Italian biologics manufacturing facility of multinational corporation Catalent in Anagni, southeast of Rome, during the COVID-19 infection, caused by the novel coronavirus.VINCENZO PINTO/AFP via Getty ImagesTicker: CTLT YTD Performance: - 66.1%Market Value Decline: $15.1 billionThe contract manufacturer for pharmaceutical, consumer health and biotech companies, has worked on producing coronavirus vaccines for Moderna and Johnson & Johnson. But with coronavirus infections slowing overall, the company has flagged "headwinds from COVID-related volume declines," and last month cut its 2023 revenue projection to a range of $4.63 billion to $4.88 billion. 4. SVB Financial Group Silicon Valley BankRafael Henrique/SOPA Images/LightRocket via Getty ImagesTicker: SIVB YTD Performance: - 68%Market Value Decline: $27 billionSilicon Valley Bank is a "good proxy for deal flow in Tech," Bespoke Investment Group said in October as SVB shares plunged double-digits following fourth-quarter results. The company has cut its 2022 outlook for net interest income as it's seen market challenges hitting liquidity flows to private companies and the overall tech landscape hurt by fears of recession and spiking borrowing costs. It's also been a rough year for innovative companies seeking to go public, with the global IPO market volumes down 45%. 3. Align Technology dardespot/Getty ImagesTicker: ALGN YTD Performance: - 69%Market Value Decline: $35.8 billionCEO Joe Hogan told Yahoo Finance earlier this year that high inflation and supply chain constraints pressured the company behind Invisalign clear braces. The "shutdowns in China really hurt our business," he said about its second-largest market. He made his observations months before China recently began easing restrictions in its strict zero-COVID policy, with economists broadly saying that should reinvigorate growth there - and perhaps re-ignite inflation. 2. Match Group Tinder mobile app on background of Tinder profiles.Beata Zawrzel/NurPhoto via Getty ImagesTicker: MTCH  YTD Performance: -69.3%Market Value Decline: $26.2 billion Shares of the parent company of Tinder, Match.com, Plenty of Fish and other dating sites have hit their lowest since publicly launching in 2015.  The company has run into slowing revenue growth in part as younger and less affluent customers feel the pinch in their discretionary spending. Match says its visibility into 2023 is "challenging." 1. Generac HoldingsA worker from Captain Electric makes final inspections on a newly installed 24-kilowatt Generac home generator on February 18, 2021 in Orem, Utah.Photo by George Frey/Getty ImagesTicker: GNRCYTD Performance: -73.8%Market Value Decline: $16.6 billion Mass COVID lockdowns helped sparked big demand for backup generators as people worked and studied at home. The power systems maker has since seen residential sales slow while commercial and industrial sales have grown. Generac last month slashed its 2022 sales outlook, driving the stock down further from its pandemic-era heights.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 27th, 2022

The 10 biggest losers in the S&P 500 this year have erased $1.6 trillion in market value

Meta, Tesla, and PayPal are among the 10 worst performers on the S&P 500 in what's been a bruising 2022 for the US stock market. Traders work on the floor of the NYSE.Thomson Reuters In a losing year for US stocks, here are the 10 biggest percentage decliners on the S&P 500.  Meta, Tesla, and Match made the cut as their shares veered toward losses of more than 60% each.  The 10 largest S&P 500 stock losers wiped out $1.6 trillion in market value.  Equity investors are no doubt eager to usher out 2022 after a turbulent year of sharp losses.Shaped greatly by Russia's war in Ukraine and central banks responding to soaring inflation with massive rate hikes, the relatively risky asset class was dragged into a bear market. The S&P 500 was on course to fall about 20%, and the Nasdaq Composite was looking at a decline of more than 30%. Looking at the carnage another way, about 70% of companies on the S&P 500 were logging negative returns as 2022 wraps up. Large-cap tech stocks including Apple and Amazon were beaten down as higher borrowing costs weigh on the value of future profits. With recession fears ramping up, high-profile tech companies including Meta and Microsoft combined have laid off thousands of workers. The 10 S&P 500 companies that have experienced the largest stock-price declines heading into the end of 2022 have wiped out a combined market value of more than $1.6 trillion.Here are the benchmark index's 10 biggest losers in 2022 on a percentage basis. 10. PayPal The interface of the PayPal app's new rewards section.PayPalTicker: PYPL YTD Performance: -63.4%Market Value Decline: $142.49 billionLike many tech companies, the digital payments processor is seeing a slowdown after a pandemic boom. Net new accounts in the third quarter increased by 2.9 million compared with 13.3 million in the year-ago period. CEO Dan Schulman told analysts the macro environment looks difficult in part with inflationary pressures in Europe and in the US, and a potentially shallow recession in the US. The shares popped higher earlier in December, however, after Schulman reportedly said fourth-quarter per-share earnings were tracking "slightly ahead" of its expectations. 9. V.F. Corp. BackcountryTicker: VFC YTD Performance: - 64.4%Market Value Decline: $18.6 billionThe company behind The North Face, Supreme, Vans and other apparel labels rounded off a rough year for its stock with the unexpected departure of Steve Randle as CEO. The Denver-based company said this year it's been navigating through a "more disrupted global marketplace," pockmarked by COVID-related issues in China and consumers facing economic uncertainty.8. Signature Bank 2022 stock chart of Signature Bank's share-price performance.InsiderTicker: SBNY YTD Performance: -64.5%Market Value Decline: $12.4 billion"We are not just a crypto bank and we want that to come across loud and clear," CEO Joe DePaolo reportedly said at a Goldman Sachs investor conference this month. The bank's shares have been hit as the so-called crypto winter has slashed the cryptocurrency market's value from its high of more than $1 trillion and crypto deposits at the bank have declined. Signature anounced plans to reduce crypto-related deposits by $8 billion to $10 billion. The stock did rise on the mid-November day that Signature said its deposit relationship with collapsed crypto exchange FTX was less than 0.1% of its overall deposits.7. Meta PlatformsMark Zuckerberg at Facebook's first ever Meta StoreFacebook/MetaTicker: METAYTD Performance: -64.9%Market Value Decline: $611.17 billionInvestors have largely pushed back on CEO and major shareholder Mark Zuckerberg's metaverse ambitions that led to the company's rebranding from Facebook last year. Its Reality Labs unit centered on virtual-world technology has lost nearly $20 billion since last year. One prominent investor has called on Meta to cut back on its Reality Labs investment.  Well aware of the backlash, Zuckerberg recently said 80% of Meta's investments are still directed to its core social media business. The drop in Meta's valuation has sliced more than $80 billion off of Zuckerberg's vast wealth, which recently stood at more than $44 billion.6. Tesla Nora Tam/South China Morning Post via Getty ImagesTicker: TSLA YTD Performance: -65%Market Value Decline: $703.12 billionThe pummeling of the EV maker's stock price this year knocked CEO Elon Musk from his perch as the world's richest man. A few forces were at work here: Musk himself blames the Federal Reserve for driving down Tesla's valuation, saying its aggressive rate hikes have pushed up US Treasury bond yields, boosting the appeal of that low-risk debt over relatively riskier assets. Meanwhile, some investors and analysts say Tesla has been hurt by Musk's sales of billions of dollars worth of  Tesla shares and his focus on Twitter after his controversial $44 billion acquisition of the social media site in October. Supply chain problems in China have also been a pressure point although the company has been able to log record monthly sales during 2022. For those watching Musk's net worth, it's fallen by more than $130 billion on the Bloomberg Billionaires Index. 5. Catalent A laboratory technicians handles vials as part of filling and packaging tests for the large-scale production and supply of the University of Oxfords COVID-19 vaccine candidate, AZD1222, conducted on a high-performance aseptic vial filling line on September 11, 2020 at the Italian biologics manufacturing facility of multinational corporation Catalent in Anagni, southeast of Rome, during the COVID-19 infection, caused by the novel coronavirus.VINCENZO PINTO/AFP via Getty ImagesTicker: CTLT YTD Performance: - 66.1%Market Value Decline: $15.1 billionThe contract manufacturer for pharmaceutical, consumer health and biotech companies, has worked on producing coronavirus vaccines for Moderna and Johnson & Johnson. But with coronavirus infections slowing overall, the company has flagged "headwinds from COVID-related volume declines," and last month cut its 2023 revenue projection to a range of $4.63 billion to $4.88 billion. 4. SVB Financial Group Silicon Valley BankRafael Henrique/SOPA Images/LightRocket via Getty ImagesTicker: SIVB YTD Performance: - 68%Market Value Decline: $27 billionSilicon Valley Bank is a "good proxy for deal flow in Tech," Bespoke Investment Group said in October as SVB shares plunged double-digits following fourth-quarter results. The company has cut its 2022 outlook for net interest income as it's seen market challenges hitting liquidity flows to private companies and the overall tech landscape hurt by fears of recession and spiking borrowing costs. It's also been a rough year for innovative companies seeking to go public, with the global IPO market volumes down 45%. 3. Align Technology dardespot/Getty ImagesTicker: ALGN YTD Performance: - 69%Market Value Decline: $35.8 billionCEO Joe Hogan told Yahoo Finance earlier this year that high inflation and supply chain constraints pressured the company behind Invisalign clear braces. The "shutdowns in China really hurt our business," he said about its second-largest market. He made his observations months before China recently began easing restrictions in its strict zero-COVID policy, with economists broadly saying that should reinvigorate growth there - and perhaps re-ignite inflation. 2. Match Group Tinder mobile app on background of Tinder profiles.Beata Zawrzel/NurPhoto via Getty ImagesTicker: MTCH  YTD Performance: -69.3%Market Value Decline: $26.2 billion Shares of the parent company of Tinder, Match.com, Plenty of Fish and other dating sites have hit their lowest since publicly launching in 2015.  The company has run into slowing revenue growth in part as younger and less affluent customers feel the pinch in their discretionary spending. Match says its visibility into 2023 is "challenging." 1. Generac HoldingsA worker from Captain Electric makes final inspections on a newly installed 24-kilowatt Generac home generator on February 18, 2021 in Orem, Utah.Photo by George Frey/Getty ImagesTicker: GNRCYTD Performance: -73.8%Market Value Decline: $16.6 billion Mass COVID lockdowns helped sparked big demand for backup generators as people worked and studied at home. The power systems maker has since seen residential sales slow while commercial and industrial sales have grown. Generac last month slashed its 2022 sales outlook, driving the stock down further from its pandemic-era heights.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 27th, 2022

"Dr Doom" economist Nouriel Roubini says the world is on a "slow-motion train wreck" while warning a US recession is a sure thing

"There are major new threats that did not exist before, and they're building up and we're doing very little about it," Nouriel Roubini said. Nouriel RoubiniREUTERS/Mike Segar Nouriel Roubini cautioned the world faces severe risks that aren't being handled carefully.  He warned people should "live on high-alert" as inflation, climate change and the risk of military conflict threaten the world.  Roubini also slammed the Fed for missing the mark on inflation, predicting a "deep and protracted" recession.  Top economist Nouriel Roubini has painted a gloomy picture on what 2023 has in store for the global economy.In an interview with the Financial Times, Roubini, often dubbed "Dr Doom" for his pessimistic predictions, said a convergence of old and new problems pose risks to the world. "I think that really the world is on a slow-motion train wreck. There are major new threats that did not exist before, and they're building up and we're doing very little about it," he said. He warned that a mix of inflation, artificial intelligence, climate change and the risk of a World War III all stand to have enormous global impact. "We must learn to live on high alert," he said, adding "We will need luck, global co-operation and almost unprecedented economic growth" for a positive outcome. Expanding on his downbeat predictions for next year, Roubini slammed the Federal Reserve for missing the mark on inflation, warning there's a sure chance the economy will tip into a recession as a result of the US central bank's aggressive interest-rate increases. Just last week, the Fed raised rates by 50-basis points as it continues its battle to bring down inflation from near 40-year highs toward its 2% target. The central bank has boosted borrowing costs by more than 400 basis points since March, fueling sharp financial-market declines across asset classes. "The conventional wisdom, coming from policymakers or Wall Street, has been systematically wrong. First, they said inflation's going to be transitory . . . Then there was a debate over whether rising inflation was due to bad policies or bad luck," Roubini said. He warned that the oncoming economic downturn will be severe. "No, this is not going to be a short and shallow recession, it's going to be deep and protracted," he said. With US inflation at 7.1% and unemployment at 3.7%, Roubini also cautioned the world's largest economy will almost certainly face a hard landing. Earlier this month, Roubini sounded the alarm on potential stock market losses given the likelihood of a US recession. He predicted the S&P 500 could crash as much as 25% if the US economy contracts next year. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 19th, 2022

Here"s why a recession is essential to the bullish outlook for the stock market in 2023

"If we manage to avoid an economic contraction next year then there will be little impetus for companies to right-size their cost structures." Michael M. Santiago/Getty ImagesA recession will be necessary to drive upside in the stock market, according to DataTrek Research.That's because a shallow recession could drive aggressive cost cutting at companies, helping boost profits in 2024."It is harder to make the case for S&P 4,800 if we do not see a US/global recession next year," DataTrek said.A bullish outcome in the stock market next year is unlikely unless an economic recession materializes, DataTrek Research said in a Thursday note."The easiest way to defend a 4,800 1-year price target on the S&P 500 is to assume a 'growth recession' in 2023 and a subsequent earnings recovery in 2024," DataTrek co-founder Nicholas Colas said in a Thursday note.And a recession is very possible next year, according to Colas, given the recent period of high interest rates and elevated inflation. But that means a recession shouldn't be a surprise to companies, and that they can properly plan and come out stronger on the other side of an economic downturn by being more profitable."When the slowdown does come, sometime in 2023, companies should be able to adjust their cost structures to keep profitability at current levels or even improve slightly. That's how you get 5% earnings growth next year," Colas said.And then from there, it's not unreasonable to expect that the broader economy will start seeing more tailwinds than headwinds, which would give investors confidence that corporate earnings can hold up, according to the note."At some point in 2023, inflation will have declined enough that central banks will be able to start cutting rates. This will spur an economic expansion in 2024. Corporate profits will reaccelerate quickly because cost structures will be leaner," Colas said.That means it's harder to make the case for the S&P 500 to rise 20% in 2023, as some expect, if a global or US-based recession fails to materialize."If we manage to avoid an economic contraction next year then there will be little impetus for companies to right-size their cost structures. This, in turn, will limit earnings leverage in 2024. If markets can't tell a decent story about earnings growth in the out year, they will be less likely to put a healthy multiple on future earnings in 2023," Colas said."It is a lot easier to be bullish if you include a mild recession into a market outlook since companies will respond as they always do: by cutting costs," Colas said. Ultimately, DataTrek is more bearish on the stock market in 2023 and doesn't expect a 20% rise, but "understanding that uber-bullish case is useful in terms of handicapping more-likely scenarios," Colas said. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 18th, 2022