Posted on 03/22/2022 3:29:06 AM PDT by EBH
A year ago, ahead of the consensus, we argued that inflation was underestimated. Now it is time to warn about the coming slowdown.
Like then, our view is unfashionable. Indeed, in the past week equity markets staged a strong comeback, a sign that investor spirits are recovering from their soggy start to 2022. As we note below, that bounce back isn’t entirely without justification. But it isn’t likely to enjoy much follow through, either.
Several factors have underpinned the most recent recovery of risk assets. Federal Reserve Chairman Jerome Powell assuaged fears by offering an unusual degree of clarity about the Fed’s first quarter-point rate hike, ruling out in advance a more aggressive half-point increase. Reports that Russia and Ukraine might find a diplomatic solution to the war is also reason for hope, despite the absence of tangible progress in their talks. Finally, despite a widening of the latest Covid outbreak in China, investors took heart from comments by Vice Premier Liu He that China would take measures to invigorate its economy.
Those factors, alongside expectations that Europe will significantly boost spending on defense and re-orient its energy dependency away from Russia have helped to re-kindle investor sentiment.
Investors continue to underestimate global GDP and earnings growth risks.
Let’s begin with corporate profits. According to FactSet, U.S. earnings growth is set to decelerate to 4.8% year-on-year in the current quarter, its slowest pace since the final quarter of 2020. Moreover, earnings growth has been revised down by nearly a percentage point since the start of the year. Of the 12 reporting sectors, only two—utilities and energy—are forecasted to have higher net profit margins relative to consensus estimates three months ago.
The percentage of companies issuing negative quarterly profits’ guidance is 69%, above the five-year norm of 60%.
(Excerpt) Read more at barrons.com ...
Barrrons and other publications have one purpose, get investors to trade. Buy, sell it doesn’t matter,
Hyperinflation benefits holders of assets and tangible goods. The wealthy get wealthier. They’re not worried about the price of wagyu beef increasing 10x every year.
Correct. The money made on trading is all that matters, not the trades themselves.
If you don’t sell, you don’t lose.
Ready cash should carry you through
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.