Published November 18th 2022

Daily Brief - Slowing the pace of hiking

TLDR

The Fed began to consider a slowdown of rate hikes. Next stop is FOMC on Dec 14th. In the meantime, the overall picture remains bearish.

Also, the RLI has been rebranded Rangefinder Index and from today it will be published on Thursdays. We’re working to get you one leading indicator for each day of the week!

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The Rangefinder index

The Rangefinder is currently caught in the middle of its standard range, highlighting the sideways nature of markets in the last month. Learn more about this index here.

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How is the market looking?

🐂 What’s bullish?

  • 💸 Falling Inflation. Inflation has come down and leading indicators like Input Price PMIs suggest it will continue to fall. Importantly, some Fed governors are already talking about reducing hiking to 50bp
  • 🤼 Short Positioning. S&P 500 Futures Positioning remains short at -20% even after the post-CPI monster squeeze.

🐻 What’s bearish?

  • 🏷️ Expensive Valuations. Valuations are insane. S&P P/E at 17.4x with dropping PMIs and earnings is no good.
  • 👩‍💼 Weak Earnings. S&P 500 Forward EPS are falling again making a new low at $277.32
  • 🔀 Bearish Leading Indicators. The TOGGLE Leading Indicator posted a first-ever quadruple dip. And the Peak & Valley index published yesterday has been saying “peak” for a while now.
  • 📈 Weak Economic Growth. Growth looks shabby across the world, with New Order PMIs at 49 in the US and … 37.7 (!!!) in Europe
  • 🗓️ Meh Seasonality. S&P 500 Seasonality is meh for the next 3 months, hovering around 3%.

🗓️ What’s next? With CPI out of the way we will have to wait till the beginning of the month for the new PMI releases. After that we’ll have FOMC on Dec 14th.

In conclusion?

We said it in the past, we’ll say it again: range-bound markets. It’s all warm and fuzzy when inflation cools down, but high P/E + falling EPS is no recipe for a bull market.

Daily Brief - Slowing the pace of hiking

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