In today’s briefing:
- Yields Up? Add Another 10% Downside for Stocks!
- EA: HICP Rolls Back from Jan-23 Crash
- CX Daily: The Bidding War for Fosun’s Nangang May Heat Back Up
Yields Up? Add Another 10% Downside for Stocks!
- The last time the 2-year US Treasury yield was at the current level, the S&P 500 Index (SPDR S&P 500 (SPY US)) was trading at just below 3,800.
- But even then, the P/E ratio of US equities was too high relative to short-term interest rates.
- The S&P 500 Index P/E ratio would have to fall to 17.4 from the current 19.1 to realign with bond yields, proving nearly 10% downside. Stay short.
EA: HICP Rolls Back from Jan-23 Crash
- The final EA HICP inflation print was revised up to 8.64%, precisely in line with our forecast for the revision (and flash) owing to less weakness in Germany.
- Core pressures regained pace, dashing hopes that the underlying monthly impulse would keep slowing toward the 2% target rather than sprinting at nearer triple the speed.
- Inflation should keep trending down, but that isn’t enough for the ECB. It should hike until pressures realign with the target or a crash makes an undershoot inevitable.
CX Daily: The Bidding War for Fosun’s Nangang May Heat Back Up
- Reform /: China plans deeper reforms to modernize key areas of government and party
- Covid-19 /: South Korea will end testing for travelers from China
- Homes /: More Chinese families planning to buy a home, survey shows
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