An important observation on the Mag 7 / AI names: Relative EPS hasn't rolled like stock prices have
Bottom-line: Equity portfolios should be more diversified but there is no reason to panic on big Tech at this stage. It is a highly crowded trade and valuations are lofty. But fundamentals stay strong. Source: TME, RBC, GS
Has the Magnificent 7's earnings growth peaked?
In Q2 2024, the Magnificent 7' net income, excluding Nvidia, $NVDA, rose by 30% year-over-year, the slowest growth since Q2 2023. This is down from 51% in Q1 2024 and below the record 57% seen in Q4 2023. It is estimated that the growth rate will decelerate further to ~17% in Q3 2024. Source: The Kobeissi Letter
The cost to hedge a 10% drop in the S&P 500 $SPY is hovering at roughly its highest point since October 2023
Source: Bloomberg, Barchart
The view from Apollo: Still no signs of a recession in the US
Source: Apollo
An important development for portfolio construction: bonds and equities are negatively correlated again.
Source: Bloomberg, Alessio Urban
Japanese stocks are trading at a reasonably low PE of 13.17 after the recent drawdown
Source: Bloomberg, Markets & Mayhem
BREAKING: The number of US bankruptcies currently under Chapter 11 jumps to 2,462, the highest count in 13 years.
A Chapter 11 filing involves court-supervised reorganization and allows a company to stay in business and restructure its finances and operations. These bankruptcies have more than DOUBLED in just 2 years. This comes after many companies have struggled to make their debt payments as the Fed raised interest rates to the highest level in 23 years. Source: Bloomberg, The Kobeissi Letter
Before the euro, Greece, Italy, Spain were adjusting for their lower productivity via currency devaluations each year.
Within the European currency union the only avenue left is adjusting via real wages pushing many people into poverty. Source: FT, Michel A.Arouet
