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The market’s abrupt fall has brought back the S&P 500 Index close to its Feb 2 breakout level (4,179.76), which if violated would bring more downside. The Nasdaq stays comfortably above that level (12,803.14). While rates are rising, clearly stocks will continue to suffer, so we must get some of that evidence that disinflation is at play. Barring that, the Fed will continue to hike until they win the game, no matter the pain or damage to the economy.

Goldman Sachs was out earlier this week with an interesting strategy piece on why the Magnificent 7 are now trading at a decent valuation to consider an entry point, as their PEG Ratio is lower than that of the median S&P 500 stock. The problem is that they are also sensitive to rates, as shown by the last chart, and these are completely dominating the picture at the moment. While earnings growth might surprise once again, and with the notable exception of NVIDIA (which normally blows numbers out of the water) they seem realistic and reachable, but until rates continue to dominate (and I am still waiting for that capitulation that – like Godot – never seems to arrive), it’s better to keep your powders dry. Definitely the Magnificent 7 will be the first to rebound as soon as the macro picture clears a bit. Hopefully no more dramas with the ADP Nonfarm Payroll tomorrow – in the last 3 months or so it has been way more damaging than its more (in)famous sibling, the Non Farm Payrolls, coming on Friday. Hold tight and watch out for the above support on the S&P 500.

#investing #macro #centralbanks #fed #interestrates #fixedincome #equities #stockmarket #sp500 #growth #value

Chart from Goldman Sachs H/t Marketwatch
Inflection Point Tom Baldacci http://www.inflectionpoint.blog

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