Better-than-expected Reports but Need to be Cautious!
In May and June of 2022, we had a very large jump in inflation. So the 12 month numbers are comparing to a fluke of the prior year. Going forward, we will see in Aug 2023 (when the July numbers are posted), costs are still climbing quite rapidly and we will continue to see cost rises going forward. Rents and insurance and cost of energy and water and a copper and childcare and shipping and corn and silver and produce and beef are all more than 25% higher than pre-pandemic 2019 and headed higher.
Base effects largely played a role in the cooling of the June CPI report. Following that logic, a higher CPI for the next release is likely coming, confirming higher entrenched inflation.
I remain very bearish on earnings for the rest of 2023, since cost inflation (in my view) will be much more resilient that price inflation (margin degradation effect).
This market will find any excuse to rise. $DJIA(.DJI)$ $NASDAQ(.IXIC)$
Not going to lie - this is extremely frustrating to me. I have been all cash/CDs for months. I did not expect we'd be close to 4500 right now.
I am still waiting for a 15-20 percent correction to enter, which I believe will come sooner vs. later.
This will be 97 trading days and counting without a -2% close for the $S&P 500(.SPX)$ . With the 0DTE stuff, and low $Cboe Volatility Index(VIX)$ , we're sitting on a powder keg. Inflation still a whopping +50% over the Fed's target.
Higher for longer on rates and tighter lending standards for weak banks means lower earnings, economic contraction, and lower stock values.
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