Second, the theme of recovery continues to jump out to us in a number of the higher frequency stats that we’ve been tracking, adding to our belief that the recent resiliency in the US equity market has been justified.
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Now, let’s jump into the details.
and economic data around the:
In our meetings over the past month, which have included a broad sample of US and non-US based investors, both hedge fund and long-only, there’s been one chart that has caused most of those we’ve spoken with to pause and reflect: our chart highlighting how the stock market essentially ignored the recession coming out of World War 2.
has been so resilient in:
s actually did happen back in:
and stock market data in the:
In both periods, a massive amount of government support for the economy was withdrawn in a hurry. Back then it was fiscal. Today it’s been monetary.
Additionally, inflation was a big problem back then just as has been recently.
% range in early:
difference we see is that in:
in the labor backdrop back in:
ty market has held up well in:
Moving on to Takeaway #2: Recovery Expectations Continue To Fuel Resiliency In Stocks
h earnings and the economy in:
Here’s what jumps out on our higher frequency stats at the moment:
- First, the S&P 500 is back in positive EPS revisions territory. At 51% on its four-week average, the rate of upward EPS estimate revisions for the S&P 500 has returned to positive territory, which means there have been more positive than negative revisions to EPS forecasts for both current year and next year’s forecasts.
- The breadth of positive revisions is improving at the sector level. Health Care has now joined Industrials, Consumer Discretionary, and Consumer Staples in positive revision territory on both EPS and sales forecasts.
- Institutional investor sentiment is showing signs of recovery. The latest data from CFTC on asset manager positioning in S&P 500 E Mini’s has continued to move up but does not look extreme yet. To be fair, this stands in contrast with the positioning of leveraged funds in S&P 500 E Mini’s, which is near the low end of its range and points to a more extreme bearish view.
and Russell:
- And finally, consensus economic forecasts continue to bake in recovery in the quarterly stats. On a q/q basis, real GDP is still expected to see its low point in 4Q23 before moving up again in 1Q24.
etings recently has been that:
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
