Weekly Market Update – August 1st

The material in each presentation has been prepared by the respective participant for informational purposes only, and does not, nor does it intend to, provide tax, legal, accounting, or investment advice. This information is of a general nature and does not address the circumstances of any particular individual or entity. You should consult a qualified advisor on your situation to answer specific questions.

The “year-ahead” for earnings

Estimates for 2023 EPS have started to tank with the S&P 500’s 2Q earnings season, while beats in 1Q and 2Q are helping keep the full-year outlook afloat. Fiscal 2022 expectations have been volatile, with nervousness around both 1Q and 2Q earnings seasons this year. But they’ve managed to hold in a range of $227-$228 a share. However, year-ahead S&P 500 earnings estimates appear to have peaked in mid-June, when consensus was forecasting $249 a share, and sit just under $244. Both S&P 500 pure growth and pure value index forecasts have dropped from peaks.

Source: Bloomberg Intelligence

Market Breadth is improving

With the first half of the year’s sell off in equities, many companies saw their stock’s price break below major technical support levels (the 200 SMA). After recent moves in U.S. equities, the S&P 500 now indicates the percentage of stocks trading above their 200 SMA closing in on 40%. This signals not only market sentiment improving, but also technical investors beginning to buy what could be “the bottom” for them.

Source: Bloomberg Intelligence

What the treasury curve is saying

As fed benchmark rates have been rising in response to inflation pressures, treasury yields have been creating a trajectory of their own. Longer term yields (greater than 3 years) have fallen over the past month, while shorter terms (1 to 2 years) have remained relatively stable. Yields under 1 year are following the path of Fed rates. This shows bond investors painting a picture of short-term uncertainty while projecting the economy stabilizing within 2 years.  

Source: Bloomberg

Going a step further… looking at Fed Fund Futures

Based on the Fed Chairman’s tone in the most recent press conference, the use of a “jumbo” hike could still be in play if inflation continues to surprise to the upside. According to fed futures, traders are seeing these kind of moves as limited plays for the fed. 

Source: Bloomberg Economics

Not feeling confident… no one can blame you

The University of Michigan Consumer Sentiment index is coming off one of its worst prints in history as inflation runs rampant and economic activity stagnates. Many consumers say they never fully recovered from the turmoil of the economic shutdown of the pandemic and recent inflationary pressures feel to have taken away any progression. 

Source: Bloomberg