All About Positioning

All About Positioning

I thought today we would switch it up, take a step back and start with a top down view of the investing landscape.  First, the market itself.  The market is down 18-25% this year bringing the market multiple to a luke warm 16-17x earnings.  However, the economic debate weighs heavily on whether earnings estimates for the future are too high which would weigh on the P and the E, compressing the P/E ahead.  On the one hand, the jobs data remains robust according to the June report we received Friday, making deep recession calls seem off base.  On the other hand, the report includes seasonal jobs and it is clear companies are reining in hiring in fear of a slowing.  At the same time, the Fed has grown emboldened to front end load the rate hikes which should bring us to a near doubling in Fed Funds by year end (from 1.75% today to maybe as high as 3.5%).  Yes, the bond market has priced much of the hikes into the forward expectations.  However, if you listen to Fed Speak, it is clear they are guessing/hoping they can avoid a recession (wait, 1Q/2Q already look like we are in a recession?) and are much more focused on crushing inflation by reducing demand (spending, jobs etc) than economic growth and the stock market.