Daily Brief - 🌩️ The bearish case

TLDR: Perma-bears have gone in hiding as the market explodes higher. Should we listen to what they have to say?

The psychology of the perma-bear is quite unique.

The perma-bear is convinced that a bearish case is emerging in the market, and is often angry that everybody else is blind to what they’ve clearly spotted: that the world is about to collapse.

The fact that the perma-bear experiences this state of perma-crisis on a continuous basis - even as the market does not in fact crash - seems to have no bearing on their belief system.

Perma-bears usually have one specific psychological trait: experiencing pleasure in reading and spreading negative news (see Pandora’s problem). This is why they are often (and correctly) accused of being selective in the facts they choose to support their thesis.

So you are correct if you tend to be skeptical of their views. They might sound smart, however that does not make them correct.

BUT.

One thing that perma-bears do is thrawl the world for the negatives, and that’s a piece of work that can be helpful. They’re basically doing due diligence for all of us. So it would be a waste to discard what they say just because Musk calls them “broken clocks”.

So what’s the negative story now? Here it is:

• Forward earnings are rising, trailing earnings are flat
• By the above point, markets are VERY expensive on trailing earnings (see chart above)
• PMIs are still in the red
• 2024 will be a contraction year, due to the policy cycle
• With strong employment rates will stay high for longer, 0 chance the Fed cuts
• The bull market is thin and led by 7 stocks
• Geopolitics are flaring everywhere.

Well now you have it. Do with it as you will, as we experience this buoyant market.

What's happening in the markets?

This section is powered by Open AI connected to TOGGLE AI

The retail sector is currently experiencing a surge in earnings, with notable performances from key players.

Home Depot set the stage, reporting better-than-expected results and a positive outlook, leading to a rise in its stock value. Despite a decline in quarterly sales, the company's robust performance was well-received by investors. Following suit, Target announced a significant earnings beat, particularly attributing its success to strong sales in the food and beauty segments.

Consequently, the stock surged by 17% the previous day. In contrast, TJX faced a dip in its share prices after providing a weak forward guidance that fell below estimates. Similarly, Walmart experienced a decline in stock value this morning due to a cautious outlook, even though the company surpassed expectations. This outcome aligns with our earlier cautionary note that Walmart's stock tends to decrease post-earnings beat.

Looking ahead, BJ’s Wholesale is set to report its earnings tomorrow, adding to the dynamic landscape of the current retail earnings season.

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