US Mid-Terms Market Setup, Earnings Season Almost Over, Asian Tech Back From The Dead
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 Trading Challenges and as ever, if you have any questions, just leave me a comment below.
Weekly Watchlist
This week could bring with it another week of wild volatility, as we have the US mid-terms on Tuesday and US Inflation figures on Thursday. The outcome of the mid-terms could mean US policy shifts on multiple fronts as the Republicans are leading in the polls and many analysts believe the likely result will be a split government, with GOP control of the House of Representatives and possibly the Senate for the second half of Biden’s term.
On Thursday, we’ll see October US inflation (CPI) numbers. As ever, for this major data release, expect cross market volatility should we get any major surprises.
The Macro View
Earnings seasons almost over. The bulk of Q3 earnings is now behind us, with 82% of S&P 500 companies having reported. Wall Street analysts have been cutting their estimates for future quarters in response to Q3’s lacklustre results. The FactSet chart below shows expected S&P 500 quarterly earnings per share for Q3 2022 through Q4 2023 in grey, as well as Q1 2021 to Q2 2022 actual EPS results in dark blue.
S&P 500 Rangebound. For now the S&P 500 is stuck in consolidation, down around 140 points from recent highs, and up around 180 points from recent lows close. Despite the massive volatility over the past few months, the index is unchanged since Sep basically. Nobody is in control yet.
The Goldman Sachs positioning indicator is at 0. No signal. The GS indicator measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. Readings below -1.0 or above +1.0 indicate extreme positions that are significant in predicting future returns.
Tech wreck. Despite recent pain, tech stocks are still nearly as inflated as they were in the late-1990s, as measured by tech as a percentage of overall U.S. market capitalization. Yikes! It’s a long way down from here.
Asian tech — back from the dead. Asian tech is staging a comeback. The HSTECH index is up +20% from recent low close.
Flight searches stable at or above ’19 levels. Always worth casting a wide net when doing your research. Kayak flight search trends, YOY %. Looking pretty robust so far.
Place your elections bets. BofA on the mid terms: “GOP win says electorate wants low inflation, DEM win says electorate wants low unemployment; policy makers will take cues accordingly…GOP win = tighter money policy = more yield curve inversion vs DEM win = looser fiscal policy = steeper yield curve.”
I hope you found this interesting and useful. I write this newsletter every Monday so make sure to follow me! As ever, keep your risk management top of mind, trade safe, and stay nimble out there.
Have a good week!
Kieran
www.traderseed.io
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