Company's earnings via the S&P 500 are heading towards 2020 pandemic lows at -12%, pointing to stagnated economic growth. While speculation is driving up share prices. Markets are looking overbought. It's the same old formula.
It is pretty obvious that markets are now overbought, mostly lead by speculative trades ala the NASDAQ, which as discussed in these posts, came alive after the Fed and the FDIC bailed out the tech/crypto/startup/venture capitalist and investment bank main street lender Silicon Valley Bank. These bailout/s mixed with inflation cues, that seemingly are abating, has everything to do with energy prices falling via global oil price caps, natural gas stockpiling and strategic petroleum releases. That is how it works. So, money got the all clear to pile back into speculation, namely Crypto and AI and yes, via the NASDAQ. Hence spilling over and moving onto cyclical and safe haven stocks such as the S&P 500 and the Dow. But, we have a problem. Speculation is fine in lieu with expectations of future earnings, offset with companies on the S&P and Dow that are actually earning. They are not.
Please refer to Chart 1, which shows the S&P 500 earning growth y-o-y collapsing at -12.70 towards its 2020 pandemic lows of -30%. Remember, we are supposed to be in a reflation environment with disinflation (economic speak). Obviously this is not the case. More so, it appears that the economy is gearing towards stagnation with large dashes of inflation still in place. Hence the GDP coming in at 2%, with companies earnings ungracefully falling very short.
Chart 2. The S&P 500 is grossly overbought.
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