Articles for tag: Central Banks, Economy, Investing, Markets, Stocks

March 25, 2025

Ron Finklestien

Market Correction Driven by Declining Valuations Rather Than Earnings

Market Selloff Drives Mag 7 Down Amidst Earnings Resilience Mag 7 Led Selloff in Q1 as All Caps Indexes Enter Correction Last week, we discussed how tariffs and ongoing policy uncertainty negatively impacted small business and consumer sentiment, contributing to the recent market selloff. In the time since, several key developments have emerged: The reciprocal tariffs scheduled for April 2 are expected to be more targeted than initially anticipated. Consumer expectations have plummeted to a 12-year low, driven by concerns over tariffs and the stock market. Consumer worries regarding the stock market are justified. From mid-February, both Large Caps, Mid

January 23, 2025

Ron Finklestien

Nasdaq Q4 Earnings Forecast: What to Expect

Financial Sector Leads Q4 Earnings Surge for S&P 500 Strong Start for Q4 Earnings Season The Q4 earnings season began last week, highlighted by reports from major banks. Early indicators show that large-cap Financials are poised for the highest earnings growth of any sector, expected to rise by +49% year over year (YoY) in Q4. Key Factors Behind Financials’ Success Several elements are driving this impressive performance in the Financials sector: Election-related trading activities have boosted revenues. Fees from initial public offerings (IPOs) doubled at many banks as IPO activity picked up, aligning with our Nasdaq IPO Pulse predictions. Optimism

December 6, 2024

Ron Finklestien

“Navigating the 2024 Goldilocks Economy: Opportunities and Insights”

2024: A Year of Economic Recovery and Steady Growth As we approach the end of 2024, economies—especially in the US—are displaying a strong recovery. The disruptions caused by Covid have diminished, marking a transition to what many are calling a “Goldilocks” economy: conditions are just right, avoiding extremes of too hot or too cold. Labor Markets Show Signs of Stabilizing Labor markets are one area where this stability is evident. During the pandemic, unemployment soared, followed by a tightening workforce as economies reopened. Now, the unemployment rates in the US (dark blue line), Canada (red line), Sweden (light blue line),

November 21, 2024

Ron Finklestien

“Q3 Earnings Fueled by the Magnificent Seven”

The Mag 7 Dominates Q3 Earnings Once Again The unofficial close of Q3 earnings season featured the last report from a Mag 7 company, Nvidia, which announced a staggering earnings increase of +100% compared to the same period last year. This trend echoes familiar patterns seen over the past two years. Once again, large-cap earnings growth primarily stemmed from the Mag 7, while mid-cap and small-cap earnings continued to decline. For Q3 (see the orange box), Mag 7 earnings climbed 20% year-over-year (represented by lighter blue bars), whereas the rest of the S&P 500 managed only a 3% increase (orange

May 17, 2024

Ron Finklestien

Hiring Plans Diverging for Big & Small Companies

Layoffs lower than their entire pre-Covid history We got data showing that initial claims for unemployment insurance dipped, and they’ve been hovering in the same (historically low) range since last fall. So, with the economy staying strong and the labor market still pretty tight, companies have been reluctant to layoff workers. In fact, layoffs (chart below, red line) are currently lower than they’ve been during their entire pre-Covid history (dashed red line). Despite low layoffs, slowing hires and quits indicates some labor market cooling Still, there are signs that the labor market has cooled. Hiring has been slowing since the Fed started hiking

May 8, 2024

Ron Finklestien

Covid Distortions Still Impacting Inflation

Inflation has risen from 3.1% YoY to 3.5% this year It’s been a tough start to the year for inflation. Headline CPI inflation was as low as 3.1% YoY, but it’s since risen to 3.5% (chart below, orange line) – that’s exactly the opposite of what the Fed wanted to see. Which is partly why Fed rate cuts have been postponed, and long-term bond yields have risen (again). Next week we get an update to CPI, and it’s expected to remain at 3.5% YoY. Most categories of inflation have normalized (Energy, Core Goods, Food) This is despite the fact that most categories

April 26, 2024

Ron Finklestien

‘Fab Five’ Makes Q1 Earnings Top Heavy

Large cap earnings growth stays positive in Q1 We’re in the thick of Q1 earnings season, with 45% of S&P 500 firms having reported. And earnings are on pace to grow +3.3% YoY (chart below, orange bar): That’s a bit slower than Q4’s 4% pace, but as more earnings come in, we might see that move higher. That’s because, as we’ve shown before, data shows US companies tend to manage expectations lower ahead of earnings season, then beat analysts’ projections. Consistent with that, so far, 77% of S&P 500 firms have beaten Q1 estimates – right in line with the 5-year average.

February 28, 2024

Ron Finklestien

Striking Disparity in Earnings Performance: Big vs Small Caps

A Glimpse Into Earnings Season Trends As the curtain nears on Q4 earnings season, a tale of two sectors unfolds. With 95% of S&P 500 companies declaring their results, it’s evident that large caps have emerged as the victors, defying initial projections. Instead of a contraction, Q4 earnings have showcased a growth of +3.9% YoY. Impressively, three-quarters of S&P 500 firms have exceeded earnings estimates, aligning closely with the 5-year average. Struggles Persist for Small Caps In stark contrast, smaller players have faced a tougher road to recovery. The S&P 400 mid-caps are on the brink of exiting their earnings

February 15, 2024

Ron Finklestien

Market Reacts to CPI Data | Nasdaq Investor Panic Grips Market as CPI Data Drives Selloff

Market Meltdown Wednesday’s CPI report triggered a market selloff, particularly hitting small caps. Both the Nasdaq-100 ETF and Nasdaq Mid-Caps ETF fell nearly 2% yesterday, while the Nasdaq Small-Caps ETF plummeted by 5.5%. The disappointing report also led to a rise in rates, with 10-year Treasury yields climbing 15bps to 4.3%. This pushed back the expectations for the first Fed rate cut to June from May. The bigger selloff in small caps can be attributed to their higher sensitivity to rate changes due to having more floating-rate debt. Troublesome Inflation The disappointment in the CPI report stemmed from the fact

February 6, 2024

Ron Finklestien

Recent Bond Yield Surge and Its Implications Recent Bond Yield Surge and Its Implications

Surge in Treasury Yields If the latest rumblings in bond markets have not caught your attention, it might come as a shock that the 10-year Treasury yields have rallied to 4.1%, up from 3.9% just a week prior. Correspondingly, mortgage rates have ascended above 7%, a steep climb from their recent low of 6.6%. What catalysts are driving this sharp upswing? Economy’s Unpredicted Strength In essence, almost all the fresh economic data in 2024 has delivered surprising robustness. This is evidently reflected in Citi’s Economic Surprise Index, which gauges the disparity between actual economic performance and its projections. The Index