The Bull Market Expands

The Bull Market is Expanding 

• Non-Tech Recovery
• There's an Appetite for Risk " Lower probability of recession."

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• MSFT - enterprise software network 
• AAPL - mobile network Network 
• AMZN - Retail /Cloud Network 
• GOOGL - Information Network  
• META - Social Network Network 
• TSLA -  EV/FSD/Robotics Network 

• NVDA - Chips network

• NFLX - Streaming Network

SPX is Resting 

• Tech is rotating into Value
• we see demand for the equal-weighted basket

Breadth is expanding, but...

Big money remains Under-weight RISK.

• Wall Street is increasing price targets although net bearish.
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• Concerns have shifted from "Something will break" to "Sticky Inflation."

• Inflation is not good or bad. It's a balance; as the cost of goods goes up so do wages. "STOP COMPLAINING"

• You can always point out an item or service that inflates faster than your wages & Vice versa (by the way, rent prices in Phoenix are falling). CPI is the overall general basket, not a single item you point out.

• If you were the one profiting, you wouldn't be complaining. Welcome to Capitalism, it's not fair. It's opportunistic

• Yes, the gov can fudge the numbers that's why we use Truflation 10 million data points on chain.
• The point is you invest in assets because they significantly outpace your goods/services and wage inflation.

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Will earnings Bottom Q2?

• So far in Q2, 61% of $SPX companies have beaten revenue estimates which are below the 5-year average of 69% and below the 10-year average of 63%.
• Top Line Revenue is declining right in line with the GDP

• ​75% of $SPX companies have beaten EPS estimates below the 5-year average of 77% but above the 10-year average of 73%. ​

• Yes, Revenue is declining, which is right in line with the GDP, but the Story is about " Bottom line rev," aka margins. Can the S&P retain earnings while the business cycle bottoms out and turns up?

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The Economy is Flirting with Recession

• The Heart of the Story 
• A rolling recession = Disinflation 
• Negative Industrial production for the first time since Pandemic.
• A Rolling Recession means economic weakness spreads
• Manufacturing - Goods
• Housing
• Retailers

• Commercial Real Estate.

...Inflation can't re-accelerate in a slowing environment (Unless supply chains break)

• GDP is Cooling Slowly
• But it may be bottoming...driven by services (services are 70% of the economy )
• ISM Services are expanding while Manufacturing contracts...GDP is in limbo
• Manufacturing/Goods may also be bottoming.....
• Housing/Real estate market is recovering
• Slowly recovering...still in recession. 
• Home builder Sentiment is forward-looking and suggests a slow recovery. 

Looking Past the Hiking Cycle

• Today Rate Expectations (pink) are much higher, while Financial conditions (black) have eased.

• Essentially higher rates have led to more accommodative conditions. "Inflation pressures have evaporated."
• The Fed is becoming more dovish & more Optimistic despite Holding Rates "high."
• Should we worry about the Yield Curve?
• Cash is leaving the Fed into the U.S Treasury Acc. Liquidity is fine

Gov + Household Debt = Fear

• Interest Payments are skyrocketing (900b annually)

• Government Interest Payments surpass gov spending
• Imagine your credit card bill exceeds your mortgage Payment.

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• The interest payments must come from GDP, or the Fed will have to cut rates (reducing payment costs) or start Printing.

• Earnings Season is the most significant catalyst of the next couple of months...Stay Tuned!