Category: Forex News, News

Corporate America Is Delivering Strong Financial Results

Moreover, there has been a notable improvement in earnings growth […]

Moreover, there has been a notable improvement in earnings growth projections. Earnings growth for the S&P 500 is now estimated at 9% year-over-year, a significant upward revision from the initial forecast of 4.7% year-over-year growth at the beginning of the year. This upward trend indicates that Corporate America is delivering strong financial results and consistently surpassing the expectations set by analysts and investors alike.

The anticipation surrounding Friday’s annual CPI revisions from the BLS was palatable, with Fed officials like Jerome Powell and Chris Waller highlighting their importance for monetary policy decisions. There was concern that the revisions might indicate that recent disinflation progress was misleading, akin to revisions last year that questioned the effectiveness of aggressive rate hikes in 2022.

However, the revisions turned out to be anticlimactic, just the way Fed policymakers wanted who sought confirmation that inflation had moderated as anticipated, especially after signalling a dovish pivot towards the end of last year. Even though there is little to see in the revised data, markets embellished evidence to suggest inflation moderated to the degree that Fed officials were led by statisticians to believe.

Based on the revisions, the market’s implied odds of a rate cut next month remained essentially unchanged( hence little to see here), hovering around 20 -25 %. However, several top-tier data releases between now and the March FOMC meeting make it difficult for traders to discount the possibility of a rate cut entirely.

With last year’s revisions concluded, market attention will now pivot to the first CPI readings 2024, scheduled for next week.

Surpassing the 5,000 mark, the S&P index finds itself 800 points beyond the most pessimistic Wall Street forecast for the end of 2024, as anticipated at the beginning of the year. I won’t name-drop as I think that is in bad taste, but as we said when this forecast came out, most of the 2024 forecasts will be wrong for no other reason than historicals no longer seem applicable in this market. In other words, you can not rely on old models.

Skepticism remains widespread in the market, yet stock prices continue to rise, with the global benchmark for risk assets nearing some of Wall Street’s more optimistic year-end targets. Despite concerns about lingering inflation, the overall US macroeconomic landscape suggests a soft landing scenario.

The recent annual CPI revisions from the Bureau of Labor Statistics (BLS) affirmed the disinflation observed in 2023, indicating that the trend was genuine within the statistical framework. This development, albeit not widely discussed in the media, reassures Jerome Powell and his colleagues at the Federal Reserve. The revisions align with the deceleration trends observed throughout 2023, potentially easing concerns about inflationary pressures.

I’m unsure why rates didn’t rally more, especially with whispers pointing to a reacceleration and getting quoted in a well-subscribed business publication. Indeed, name-dropping, especially well-known strategists with dumb ideas, is replete at this publication, which I assume is to pay the bills on slow news days.

OK, kids, listen up: There ain’t no such thing as accurate whisper numbers regarding macro.

This oddity seems to come up repeatedly by the usual tin foil hat types. My argument is and always has been when it comes to macro whispers: why would anyone take the career or reputational risk of trading or even sharing whispers?

Finally, investment decisions should not be solely based on skepticism towards central bank policies or fear of market bubbles.

Participating in market trends, including bubbles, can indeed lead to profits, at least in the short term. Many investors who remained cautious or bearish throughout the recovery from the Global Financial Crisis (GFC) or the COVID rebound missed out on a significant rally party(s).


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