Regular readers know I've spent decades using data to track Wall Street. But sometimes, Wall Street just comes right out and tells you exactly what it's thinking...
JPMorgan Chase CEO Jamie Dimon is Wall Street's ultimate insider.
Earlier this month, he warned folks to get ready for a financial "hurricane." And he followed it up by saying that he "just wouldn't bet" on the hoped-for "soft landing."
Now, the phrase "soft landing" is important. Dimon is alluding to the Federal Reserve...
The Fed hoped to cool inflation without leading to a major recession. But folks, that looks less likely by the day. And now, Wall Street's ultimate insider is echoing that sentiment.
It's not surprising. Inflation is rampant. And the Fed's plan to tame the beast involves a series of large interest-rate hikes and a rapid unwinding of its balance sheet.
During 15 years of monetary and fiscal stimulus, price inflation didn't occur – but asset inflation did. By that, I mean growth stocks, cryptocurrencies, special purpose acquisition companies, leveraged buyouts, and more all benefited from the Fed's "easy money."
Mega-growth stocks, story stocks, and bitcoin alike defied gravity and soared to excessive heights during the golden era of quantitative easing and fiscal stimulus.
But that has all changed now.
The Fed's unwinding of these excesses isn't over. And the day of reckoning is getting closer.
The man who called the 2008 and 2020 crashes predicts a massive financial "heist" could sweep the U.S. He has already warned the U.S. Pentagon and the FBI. But few people are willing to admit this could actually happen on U.S. soil. Or how one move right now could make you massive profits as it unfolds. Click here to learn more.
It's actually much bigger and more important than what happens to the Nasdaq or S&P 500. Yet some of the world's best investors are practically drooling in anticipation. Because this crash will create a slew of 100%-plus opportunities... backed by legal protections that stocks can only dream of. A top analyst tracking the story believes this could happen within months – and you must prepare now. Get the full story here right away.
In short, a three-fold dynamic is driving stock prices lower...
Rampant inflation higher than 8%, year over year
Impending interest-rate hikes and deleveraging of the Fed's balance sheet
A collapse in price-to-earnings (P/E) ratios – particularly for the megacap and speculative growth stocks that led the bull market to all-time highs
The P/E ratio for the S&P 500 Index has already fallen a lot from its peak. But the thing is... it can drop even further if growth hits a wall.
In past Fed rate-hike cycles that were fast like this one, P/E ratios didn't bottom out until well into a bear market. That's when analysts started cutting their earnings estimates.
That brings us to the biggest unknown – and the biggest risk – for the stock market...
I'm talking about corporate profits in the second half of 2022.
Wall Street analysts are still looking for a robust rebound in corporate profits. But that seems very optimistic...
Remember, inflation is rising sharply. As a result, input prices and wages are also rising.
With that in mind, company guidance alongside second-quarter earnings reports could be weak. And that could lead Wall Street analysts to lower their full-year 2022 estimates.
That would cause a further contraction of P/E ratios. And in turn, that could generate a broad liquidation of stocks.
That's how market bottoms form.
Be prepared for a washout buying opportunity to happen later in 2022. It could happen in September or October. By then, the S&P 500 will likely be between 3,400 and 3,600.
For now, the market is telling us to keep looking into the hottest industries. Focus on energy, metals and mining, chemicals, food, aerospace, defense, and health care.
And on the flip side, we want to avoid struggling sectors. Today, those sectors include technology, consumer discretionary, and telecommunications.
Until a bottom has formed, we need to stay patient and focused. It's always tough to stick to our game plan. Fortunately, our best opportunity could come sooner than you realize.
Good investing,
Marc Chaikin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.96%
1
25
4
S&P 500
+1.40%
22
363
111
Nasdaq
+2.50%
3
68
27
Small Caps
+1.46%
182
1174
533
Bonds
+1.87%
Consumer Discretionary
+2.81%
2
21
35
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain Bearish. Major indexes are mixed.
* * * *
Top Movers
Gainers
BA
+9.46%
NFLX
+7.50%
CEG
+6.91%
WBD
+6.22%
ETSY
+6.20%
Losers
VLO
-4.08%
SLB
-3.93%
ALB
-3.69%
MPC
-3.67%
BKR
-3.61%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
KR, ZBRA
ADBE
No earnings reporting today.
Earnings Surprises
WLY John Wiley & Sons, Inc.
Q4
$1.08
Beat by $0.11
* * * *
Sector Tracker
Sector movement over the last 5 days
Staples
-5.07%
Health Care
-6.70%
Industrials
-7.06%
Discretionary
-7.62%
Real Estate
-7.78%
Information Technology
-8.10%
Financial
-8.43%
Communication
-8.47%
Utilities
-9.35%
Materials
-9.77%
Energy
-10.73%
* * * *
Industry Focus
Bank Services
1
79
19
Over the past 6 months, the Bank subsector (KBE) has outperformed the S&P 500 by +1.72%. However, its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #17 of 21 subsectors and has moved up 4 slots over the past week.
Indicative Stocks
NYCB
New York Community B
RKT
Rocket Companies, In
LKFN
Lakeland Financial C
* * * *
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