I’m not sure if you’re a fan of football, but the game often plays out like this: our team is winning to some extent, but we are the weakest team. The other team is better with a more knowledgeable quarterback, a stronger team, and the data supports their potential victory. This is how I perceive the market to be playing out.
Currently, there are numerous drawbacks in the economy. Inflation rates and interest rates are high, layoffs are rampant, and consumer credit is increasing everywhere. Although the job market is resilient, it’s highly probable that you know someone who is jobless. The Federal Reserve has confirmed that they will continue raising interest rates until the job market improves. The obstacles are significant, and investors are nervous. As we noted yesterday, the market will depend on data. Tomorrow is the CPI. Thursday is the PPI. Earnings season is getting ready to start….it is 4th quarter in the game. Everywhere we look, the data indicates that we are weak and will continue to weaken. There is some hope for this week and the beginning of the earnings season, but can we pull off a Cinderella recovery? The clock is ticking, and our fate will be determined in the next quarter or two. You will likely know sooner than later.
We recommend exercising caution before becoming too bullish. Tomorrow, the CPI report will be released, and on Thursday, the PPI report will come out. Although no number will slow the Federal Reserve’s current rate increase, a high number will strengthen the conviction for higher rates. The earnings season is approaching, and we anticipate weak estimates. The game will unfold, but it’s crucial to remain vigilant and concentrate on the long-term.
Stay tuned; more information will be available tomorrow, and it will surely be intriguing! We will have ongoing commentary on the inflation numbers and of course the earnings season. As they say in Chicago, if you don’t like the weather wait a day. We know the winds are blowing but will we have more of a storm or a beautiful spring.
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