In episode 64, Will and Adam discuss the winnowing of the Magnificent Seven to somewhere between three and four, and the exorbitant valuations on the shrinking number of winners. We also look at the conundrum faced by businesses dealing with pushback from consumers on rising prices while at the same time increasing demands (not to mention government mandates) on wages.
Will and Adam return from a hiatus with the S&P 500 at an all-time high. They recap what drove returns in 2023 (index flows, zero-day options, the Magnificent Seven) and what expectations are baked into valuations at current levels (above-average earnings growth and six Fed rate cuts). They also juxtapose the divergent growth expectations the low price of oil seems to be indicating in spite of elevated geopolitical tensions.
The weather has just now started to reach consistent levels of freezing temperatures, so hopefully soon we will introduce our children to the joys of skiing.
We were in Memphis for Thanksgiving and saw the musical Six, which is about the wives of Henry VIII. Though a polarizing choice in the Eagleston house, we will use it as inspiration for this month’s update. I am going to refrain from putting in links to the songs for the mental health of our readers.
The end of the year is always a hectic time, and although some argue turning the calendar to a new year is capricious and arbitrary, most people (not to mention Uncle Sam) do not look at it that way. To that end, let’s look at four things you may want to be discussing with your financial advisor before the clock strikes 11:59 on December 31.
Having only recently moved back to Cincinnati, I was a little unprepared for the autumnal gloom that can overwhelm the beauty of the foliage. This became apparent on a jaunt to Pittsburgh for our daughter’s soccer team where, unfortunately, the soundtrack was (and I am only being somewhat hyperbolic here) driver of GDP growth, inspirer of Halloween décor, and destroyer (or would-be savior) of American football, Taylor Swift. We will celebrate her entire catalog (as well as another, older Swift).
We revisit the risks associated with passive investing as the Magnificent Seven stocks become even more unmoored from the rest of the S&P 500. We also analyze the likelihood of the Fed engineering a soft landing, why the market may have celebrated a win on inflation too early, and how we are trying to navigate through this challenging environment.
We talk about the ongoing shift in labor market dynamics and its implications for inflation going forward, which could be “higher-er for longer-er”. The market’s recent rebound, fueled by hopes of a soft landing and a bounce in the most shorted stocks, is also discussed. We also look at concentration of the index in a handful of stocks and compare recent earnings for some of the tech titans to the rosy projections for next year.
Will and Adam provide their perspective on the market impact of events in Israel and Gaza, which come at a perilous time from a market perspective with yields reaching psychologically important levels. We also discuss how flows into passive funds have had an outsized impact on the so-called Magnificent Seven stocks and juxtapose their performance (and valuation) versus the rest of the market. Finally, we look at some real-time data on what is happening for economic canaries like shipping and small business.
October Update - Key Takeaways • Bond vigilantes pushed U.S Treasuries into a historic decline in September. • The end of 2023 may be a crucible for investors. • Events in the Middle East are eerily similar to prior flashpoints that have devolved into wider conflagrations.
