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The third quarter 2022 earnings season may be better than feared The consumer is healthy but becoming more discerning Strong earnings expected from the energy sector Yesterday was World Statistics Day! While it is only officially celebrated every five years, we can always appreciate the importance of statistics in our everyday lives. Whether it’s calculating the time it takes to get to the office, breaking down a monthly budget, or monitoring the weather, numbers are all around us. And over the next two weeks, when over 60% of the S&P 500’s market capitalization reports third quarter earnings, investors will have even more statistics to analyze. But as we’ve said before, it’s not just the results but the accompanying forward-looking commentary from CEOs that helps craft our outlook for the months ahead. Why? The results are backward looking, but the projections …

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Key Takeaways Retailers will discount to deplete the inventory glut Higher prices may hamper the consumer’s ability to travel Mismatch between rental price beliefs and reality This week’s inflation releases are testing investor patience once again. While the September reports for both the Producer and Consumer Price Indices were hotter-than-expected, these prints have not altered our expectation for what lies ahead. If anything, the categories with notable, still rising price increases (e.g., rents) were not unexpected as they tend to be a lagging component. It is difficult to pinpoint exactly when the ‘official’ government-released inflation statistics will reflect the on-the-ground improvements we are detecting, but we still believe that a more consistent inflation easing will occur in the final months of 2022 and early months of 2023. We have outlined a five-step timeline that charted the path of how inflation …

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30/09/2022 Key Takeaways Three consecutive negative quarters for bonds & equities Good news becoming bad news for a more hawkish Fed Anticipating a mild, not severe, recession A September to remember? More like one we’d like to forget! After the Fed cautioned that the tightening cycle was far from over and that “some pain” would be ahead for the economy, the markets recalibrated Fed expectations (e.g., higher for longer) and accelerated concerns for a seemingly inevitable recession. It’s been a challenging year for investors, and this September slump has not made it any easier. In fact, the equity and fixed income markets are set to simultaneously notch three consecutive negative quarters for the first time in over four decades. As we enter the fourth quarter of this tumultuous year, we’re putting the volatility seen during the month of September into …

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Key Takeaways Yield curve reveals the bond market’s economic outlook Yield curve inversions often project an eventual recession Inversion doesn’t immediately end the bull market Happy April Fools’ Day! The first quarter of this year was no joking matter for investors. While the escalation of the Ukraine-Russia conflict has increased volatility (and caused commodities to soar), expectations of the pace and magnitude of the Federal Reserve’s (Fed) tightening cycle has ratcheted up market tensions. On one hand, there are calls for the Fed to be more aggressive to tame inflation. On the other, there are concerns that the US economy will not be resilient enough to withstand higher borrowing costs. And with the market weighing these outcomes, the yield curve (2-year vs. 10-year Treasury yield) flirted with inversion for the first time since 2019. While there are many parts of …

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Key Takeaways The economy can absorb the Fed’s interest rate hike Buybacks are on the rise given current valuations Ukraine expresses willingness to claim neutrality This Sunday, March 20, is the first official day of the spring season! And while the spring season springs forth fresh blooms, warmer temperatures, and more daylight, it may also bring renewed hope for equities. On the financial front, we just experienced a ‘winter of negativity’ during which increased geopolitical tensions, recession fears, and market concerns have left the S&P 500 down ~10% year-to-date. But even through the S&P 500 has fallen back to the level from last July, there is reason to believe that the ‘forecast’ will improve not only for us, but for the equity market too. The increased uncertainty caused the market to enter correction territory, but we think there are five catalysts …

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Key Takeaways Food prices may rise if conflict lingers into planting season Russian economy dependent upon natural gas exports Russian oil ban will not cause a repeat of the 1970s Are we in the midst of a commodity super-cycle? That is a common question amongst investors as commodity prices surge as the tensions between Russia and the Ukraine extend into the 16th day. In prior Thoughts On The Market publications, we discussed that while Russia and the Ukraine combined represent a small portion of the global economy (~2%), they provide an outsized exposure to several key commodities. Below we discuss the surging costs of grains, energy and metals, and the complications that may result if a resolution is not soon reached. The longer the Russia-Ukraine crisis persists, the greater the potential of negative consequences for the global economy (e.g., higher commodity prices …

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Key Takeaways A diplomatic resolution remains our base case Higher oil prices would impact the global economy Energy prices could force the Fed to be more aggressive A picture is worth a thousand words. And the satellite images and social media posts revealing the scale and sudden intensity of Russia’s military deployments and equipment miles from Ukraine’s border speak volumes. Russia is amassing troops as it demands that Ukraine never become a NATO member and that NATO’s presence in Eastern Europe be reduced to 1997 levels. With the US unwilling to concede to this proposal, the diplomatic talks between Russia and the US and its allies have lacked a clear path forward, and the uncertainty is causing volatility in the equity markets. While President Biden has vowed to give “diplomacy every chance to succeed” to defuse the tensions with Russia, …

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Key Takeaways Easing supply chains could allow for a more patient Fed Omicron doesn’t stop economy from adding jobs Higher gas prices a downside risk to our economic outlook Punxsutawney Phil—the most famous groundhog—saw his shadow! So for those of us braving colder temperatures, we may have six more weeks of winter to go. Fortunately, historic weather data doesn’t give this furry forecaster much predictive power. But if there is one thing investors can count on over the next six weeks, it is that the Fed will be underground assessing the economic outlook ahead of the critical March Federal Open Market Committee Meeting (March 15-16). With Chair Powell’s latest commentary causing market volatility to come out of hibernation, the upcoming economic data releases will be all the more critical in discerning how the Fed’s economic forecasts and policy adjustments may …

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Key Takeaways Expecting fourth quarter of +20% earnings growth Investors will take note of companies that miss estimates CEO commentary will provide critical insights for 2022 This Monday would’ve been Muhammed Ali’s 80th birthday! The Champ is regarded as one of the iconic athletes of the 20th century given his status as a three-time world heavyweight boxing champion and Olympic gold medalist. But his nickname ‘The Greatest’ may just have to be shared with the earnings results we witnessed throughout 2021, as record earnings growth, earnings beats, and net margins drove the S&P 500 to all-time highs. As we enter the fourth round (4Q21), we expect this quarter to be a heavy hitting season that solidifies our expectation for another above-consensus earnings growth year in 2022. With Big Banks starting to report today, we’re reflecting on the expectations for the …

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Key Takeaways Consumer fundamentals near or at pre-COVID peaks Macroeconomic backdrop should bolster earnings growth Historically low volatility unlikely to continue in 2022 The opening ceremony for the Winter Olympics is just four weeks away, but the athletes have spent years training to ultimately experience either the thrill of victory or the agony of defeat. As we anxiously prepare to watch, we felt the Olympics scored a 10 as a backdrop for our Ten Themes for 2022, which we will present via a webinar this Monday, January 10 at 4:15 EST. Our Ten Themes presentation is a collection of what we deem to be the most critical economic and financial market insights for investors in the upcoming year, and each will be tied to one of the captivating winter sports. As a sneak peak of what to expect, we’ll use ski jump, …

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