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.
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: