So we see commodities,staples and utilities rallying in late business cycle. That what’s happening currently. No sure how you can see a +ve bull market here
Completely agree this is getting late cycle. But I think there's a lot left in the tank into next year. I wrote a post awhile back about drivers for the bull market over the next 12-18 months.
That includes earnings, central bank liquidity, and decade cycle seasonality. I believe those catalysts remain in play, esp following the Fed.
And lots of sectors are rallying. Defensive's rallying like you point out. But so are areas like industrials, housing, and financials. If anything, to me that's broad breadth in the rally which is also a positive.
In 1995, the S&P traded at a TTM P/E ratio of <15x and a Shiller CAPE of about 20x. Today, the TTM P/E is closer to 30x and the Shiller CAPE is almost 37x. Y/Y EPS growth of 18% at this point in the cycle would be unprecedented. Consensus estimates are likely to be revised much lower over the next six months. By our work, EPS growth probably peaked in 2Q24 and could be down 15% Y/Y looking out to year-end 2025.
We see a recession materializing over the next 3-6 month. Indeed, if the de-inversion of the yield curve and the Sahm Rule are correct, then the U.S. economy may already be in recession. The average EPS drawdown during the past 10 U.S. recessions is about 30%. We assume that it will be approximately half that severe.
Thanks! Can you comment semiconductor's group weakness, which are cyclicals too?
Thoughts on semiconductors (SMH) posted here:
https://substack.com/@mosaicassetco/note/c-70062105?utm_source=notes-share-action&r=1fr3d5
You make a great point and I would like to share a chart on this. I don't think I can post a chart here, so I'll do it as a note on Substack today.
Commodities are rallying, XLU, XLV RALLY. How can the outlook be +ve ?
Oh yeah. So timeline matches with Michael howell’s liquidity timeline. So Gold target of 3000 is entirely possible
So we see commodities,staples and utilities rallying in late business cycle. That what’s happening currently. No sure how you can see a +ve bull market here
Completely agree this is getting late cycle. But I think there's a lot left in the tank into next year. I wrote a post awhile back about drivers for the bull market over the next 12-18 months.
That includes earnings, central bank liquidity, and decade cycle seasonality. I believe those catalysts remain in play, esp following the Fed.
And lots of sectors are rallying. Defensive's rallying like you point out. But so are areas like industrials, housing, and financials. If anything, to me that's broad breadth in the rally which is also a positive.
I'm not sure I understand your question about the outlook. Could you provide a bit more context/details? Thanks!!!
So if we take costco as barometer it’s trading at 55 p/e . That tell me smart money is investing defensively
In 1995, the S&P traded at a TTM P/E ratio of <15x and a Shiller CAPE of about 20x. Today, the TTM P/E is closer to 30x and the Shiller CAPE is almost 37x. Y/Y EPS growth of 18% at this point in the cycle would be unprecedented. Consensus estimates are likely to be revised much lower over the next six months. By our work, EPS growth probably peaked in 2Q24 and could be down 15% Y/Y looking out to year-end 2025.
Thanks for sharing!
I'm always looking for the counter argument to my views...would you mind sharing how you arrive at the earnings peak in 2Q and subsequent drawdown?
I subscribe to your reports, so apologies if I missed it in one of your posts!
We see a recession materializing over the next 3-6 month. Indeed, if the de-inversion of the yield curve and the Sahm Rule are correct, then the U.S. economy may already be in recession. The average EPS drawdown during the past 10 U.S. recessions is about 30%. We assume that it will be approximately half that severe.