In today’s briefing:
- How to Trade the Split Personality Market
- How Economic Myopia Is Leading Investors Astray
- Modern Monetary Policy Conduct: Pausing Becomes Fashionable Despite Sticky Inflation
How to Trade the Split Personality Market
- The U.S. equity market is becoming very bifurcated. Leadership is composed of a handful of frothy growth names while value and cyclicals are laggards and signaling recessionary conditions.
- Investors who want to trade growth stocks can use the price momentum factor.
- Investors who are seeking value opportunity should consider Japan and Eurozone equities.
How Economic Myopia Is Leading Investors Astray
- Investors have become overly myopic about the nature of the latest economic cycle.
- This cycle should really be viewed as an elongated recovery from the 2020 pandemic .
- The best analogy of the current cycle is the double-dip recession in the manner of 1980–1982.
Modern Monetary Policy Conduct: Pausing Becomes Fashionable Despite Sticky Inflation
- The Fed’s decision not to raise the federal funds rate is not expected to presage a prolonged break, particularly if the real economy and inflation remain resilient.
- Guidance towards further increases in the Fed’s policy rate could reflect greater confidence by members about the outlook for the banking system and the availability of credit.
- Companies have preserved operating margins via higher selling prices. Lower inflation will necessitate a compression in profitability. Housing stabilisation and buoyant US equity prices suggest Fed policy is not tight.
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