Ep 51: Are Markets Issuing the All Clear or Is the Ride Just Getting Started?

Ep 51: Are Markets Issuing the All Clear or Is the Ride Just Getting Started?

 

 



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Last week the S&P 500 and the Russell 1000 briefly dipped into correction territory, but by Monday, Feb. 12th both appeared to stabilize after two consecutive closes in the green. Tuesday equities once again opened in the red as Tematica’s investing mixologists Chris Versace and Lenore Hawkins broke down what pushed the major indices into the red for the year and what investors can expect in the coming months.

To put the decline in context, our mixologist noted that the forward PE ratio for the S&P 500 peaked right about the same time as did the price of bitcoin, which happened to be right around when tax reform was passed in a perfect example of “Buy the rumor and Sell the news. It appears that is when asset price optimism peaked. Volatility, which had been absent for most of 2017, remains elevated well above the range that dominated last year and as Hawkins shared in last week’s Weekly Wrap, it’s likely to be with us for some time.

Tematica’s dynamic duo assess the conflicting winds of fiscal and monetary policy as the stimulative effects of tax cuts and increased government spending go head to head with the slowing effects of a Federal Reserve that is expected to raise rates at least three times and maybe even four in 2018 while simultaneously tapering its massive balance sheet. The two discuss what they are seeing in terms of inflation indicators that may impact the market’s expectations of the Fed’s actions in the coming year and just what data they’ll be digging into for insights as this mano-a-mano between fiscal and monetary policy goes into the economic ring for Round One. Get ready to rumble!

 

Companies mentioned on this podcast

  • American Railcar (ARII)
  • CSX (CSX)
  • Cummins (CMI)
  • Daimler (DDAIF)
  • Eaton Corp (ETN)
  • Freightcar America (RAIL)
  • GATX Corp (GATX)
  • Greenbrier (GBX)
  • JB Hunt (JBHT)
  • Kansas City Southern (KSU)
  • Landstar (LSTR)
  • Meritor (MTOR)
  • Navistar (NAV)
  • Norfolk Southern (NSC)
  • Paccar (PCAR)
  • Rush Enterprises (RUSHA)
  • Ryder Systems (R)
  • Trinity Industries (TRN)
  • Volvo (VOLVY)
  • WABCO (WBC)

 

 

Resources for this podcast:

 

 

Books we’re currently reading:

Versace: Team of Teams: New Rules of Engagement for a Complex World

Hawkins:  Leading Indicators: A Short History of the Numbers that Rule our World

About the Author

Lenore Hawkins & Chris Versace
Lenore Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, strategic planning, risk management, asset valuation and operations optimization, her focus is primarily on macroeconomic influences and identification of those long-term themes that create investing headwinds or tailwinds. Chris Versace is Tematica's Chief Investment Officer and editor of Tematica Investing newsletter. All of that capitalizes on his near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks.

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