Perhaps no chart better sums up the Prove-it-to-me state of the current market than the one below:
On one hand is what I’ll call the Wilson camp that sees risks to both forward earnings and multiples:
According to Wilson, although higher inflation and slower economic growth are now the consensus view, this doesn't mean either is fully priced into equities.
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Wilson said growth scares that fall shy of a recession should bring the forward EPS for the S&P 500 index to $231, down from $238, prompting a selloff.
While on the other are corporate insiders, whose buying activity indicates a fair degree of confidence in their future earnings:
The exception being Energy execs:
And Elon Musk (I’ll share my thoughts on Dimon’s “hurricane” comments privately with those interested as they’re not printable here):
But my sense is this is specific to TSLA and those laid off workers won’t struggle to find jobs:
On the labor front, the picture is increasingly bifurcated as hiring freezes and layoffs are hitting the tech space and pockets of the manufacturing sector:
But the overall picture remains robust:
And the labor force participation rate has yet to recover which will help keep a lid on wage inflation:
While I’m not sure I would characterize quits as having rolled over, the payroll mosaic does indicate a move past peak tightness:
And substitution effects are kicking in as well:
Speaking of inflation, PSC Macro is now aligned with Boston Consulting Group’s “bottleneck” economy we highlighted previously:
Returning to Mike Wilson’s comments regarding what is priced in in equity markets, I’d argue a lot:
And absent from the gallons of ink spilled about weakness in the housing market is any meaningful context with respect to pre-Covid levels:
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