Published June 17th 2022

Daily Brief - Can the economy take 75bp?

TLDR

Inflation called and the Fed responded. With an unexpected 75bp hike, the Fed earned the respect of the market, which responded with a relief rally (remember when Trump was elected?).

So the market liked it (for a day). But can the economy take it?

So far, leading indicators show good readings, but we remain wary of a consumer strike.

The TOGGLE Market Checklist

A few key points paint a positive picture: Citi Eco Surprises seems to have bottomed, New Orders PMIs rose and so did S&P forward earnings to a new high! Citi inflation Surprises are moderating and - whilst the market is still very expensive, positioning seems clearer than 2 weeks ago. And seasonality is good for June-Aug!

If there’s one chart we’d suggest you look at is the Forward EPS for S&P 500, which keeps making new highs in spite of all doomsday predictions.

market checklist june 16 2022

Show me the data

Here are the links to all the data points discussed above:

Idea Spotlight: Capital One

Capital One's realized volatility dropped to 46.89 and historically, this led to a median increase in price of 18.23% over the following 6M. TOGGLE analyzed 18 similar occasions in the past to produce the median projection and this insight received 7 out of 8 stars in our quality assessment.

"Even with higher rate and inflation, Capital One looks good" says Seeking Alpha.

capital one price history

Daily Brief - Can the economy take 75bp?

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