2/26 Best Idea For The Week Ahead + 10 Charts That Interest Me.

Before I get into my best ideas let’s talk about the overall market and where we sit. Right now we are re-testing the breakout we just had, normal price action, we’re on the edge but not breaking down just yet. I go over the technicals everyday so I won’t bore you with that. Right now, Morgan Stanley has earnings this year coming in at $195 on the SPX, most were at $230, consensus is down to $223. That leaves us at 17.8x consensus at the moment and 20.3x the estimate from Morgan Stanley. Looking forward to next year though, we’re at 16.4x the estimate from Morgan Stanley.

If you step back and think of the market in terms of earnings yields, considering that the fed funds rate is 5% and there is no need to take a risk when the return on the market is about the same, you could see how some think equities are the wrong price. Bank of America had this chart below recently.

Bottom line, yes stocks broke a major downtrend recently, my focus is on price action, because price never lies, but friday morning the PCE number showed the fed does not have this situation under control in any way. The question is, if the market is pricing in a “soft landing” because the fed keeps telling us that is so, when will the market begin to lose faith in that concept which seems less likely with every passing day?

Just something to ponder as inflation data begins to run hot again.

Best Idea For The Week Ahead