Biden’s approval rating vs Inflation, August Market Seasonality, Stocks no longer expensive
Hey it’s Kieran! Another week in the markets is upon us, so here are the key events to be aware of, and the most interesting Macro research coming out of the investment banks. I’ll hopefully speak to you this week in the Traderseed programs and as ever, if you have any questions, just leave me a comment below.
Weekly Watchlist
After US GDP data last Thursday showed that the US economy is on the brink of a recession, this Friday’s monthly ‘Nonfarm payrolls’ employment report will be even more highly anticipated than usual. The report is expected to show that the labor market remains robust, despite reports that some companies are cutting jobs and freezing hiring. A smaller than expected number could bolster the view that the Fed may not be as aggressive as expected when it comes to interest rate hikes.
Some better-than-expected earnings reports helped boost stocks last week and the deluge of earnings results is set to continue in the coming week with a broad range of companies. Positive forecasts from Apple and Amazon on Friday showed resilience in the giant companies to survive an economic downturn. Second-quarter US corporate results have mostly been stronger than expected. Of the 279 S&P 500 companies that have reported earnings so far, 77.8% have exceeded expectations. according to Reuters data.
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The Macro View
S&P 500 August Seasonality. July played out exactly according to seasonality, with a strong move up throughout the entire month. Historically August is a flatish month, with a correction early, then a move up towards the end of the month.
Nasdaq stocks have moved up very fast.. now 80% of them are above their 50 day moving average, signalling short term optimism in these market leading tech names.
Stocks are no longer expensive. Equity valuations were back down to their long-term average after this year’s sell-off, although this bounce during July has taken some of the shine of the low prices.
Sentiment still screaming Buy. Despite the July bounce higher in equities, sentiment, based on the positioning of Goldman Sach’s retail and institutional clients remains very light.
Biden approval rating vs US CPI inflation. Very much negatively correlated, and not good news for the current US administration should this continue to drag on.
Europe’s not so transitory inflation problem. Everything is more expensive. Broad based price rises in energy, food, hotels, restaurants, furniture…you name it.
S&P500 2008 v 2022. These analogies are always fun to track, and are often surprisingly accurate. The S&P 500 today verses the global financial crisis crash of 2008. Both traded slowly down into the summer, where we saw a bounce throughout July. August was flat, then the final painful leg lower started in September. One to keep in the back of your mind.
I hope you found this interesting and useful. Make sure to follow me to get this market update every week and if you have any questions, comments or feedback, let me know in the comments below.
Have a good week!
Kieran
www.traderseed.io
