Has J Powell handed Trump a ticking time bomb?
By prematurely cutting rates by 50 bps ahead of the election, even with inflation still running above target, the Fed has set the stage for an inflationary resurgence. The latest October inflation data released yesterday confirmed the trend, with PPI coming in at 2.4%, hotter than the expected 2.3% Meanwhile, core PPI rose to 3.1%, ahead of the expected 3.0% increase The bond market starts to price in this risk, with 10-year Treasury yields up nearly 70 bps since the Fed's began cutting overnight rates in September Rising borrowing costs will become a major headwind for Trump's pro-growth, and likely pro-inflationary, fiscal policies. And it could soon become a major problem for equity investors paying a near record high 28x (TTM) earnings in today's stock market. Source: Porter Stansberry @porterstansb on X, Marketwise,T
ARE US STOCKS OVERVALUED ⁉
☢ S&P 500 earnings yield FELL below the 10-year Treasury yield for the 1st time in 22 YEARS. ❗In other words, less risky (theoretically) 10-year Treasury is paying MORE than the S&P 500. ⚠This could imply lower than average forward returns for S&P 500. Source: The Daily Shot, Global Markets Investor
The US accounts for 74% of the MSCI world market capitalization, also a new all-time high.
Source: SG
Will the "Trump trade" start top fade in December?
Goldman Sachs' trader John Flood highlighted the 2016 analogs: the 3 trades depicted below (Domestic vs. International sales, Cyclicals vs. Defensives, Small-caps vs. Large-caps) skyrocketed in November 2016 but ALL started to fade in December 2016, going nowhere in Q1 2017. Could we see something similar in December and Q1 2025 ? Source: www.zerohedge.com, Goldman Sachs
BofA (Woodward):
"the net supply of US equities has shrunk -$473bn. The steady growth of buybacks, a key source of demand, has overwhelmed sources of new supply such as share issuance, IPOs, and stock-based compensation." So basically we have: 1) US stocks: shrinking supply, (ever-) increasing demand 2) US Treasuries: rising supply, decreasing demand Source: Neil Sethi
The king reports earnings exactly ONE WEEK from today. $NVDA
Source: TrendSpider
$SPY The S&P 500 had its best-performing week of 2024. Here are the top-performing stocks from last week: 👇🏻
Source: The Future Investors @ftr_investors
FLOWMAGEDDON: A Trump-inspired gusher of cash is flowing into risk-on ETFs, +$22b in one day is absurd, that is normally a good WEEK.
YTD net flows now +$856b, (55b away from annual record) and the rolling 1-year has passed $1T Source: Eric Balchunas, Bloomberg
