2018 — 2021: correlation between S&P 500 and Fed monetary actions was 0.92 (i.e. nearly 1 for 1)
2022 YTD: 14% of all global wealth in financial assets has been erased ($35 trillion); 2008 figure was 19%
- 2008 was primarily financial institutions, MBS’s, CDOs, financial stocks
- Now is wider spread: credit markets, equity markets, crypto, ...
Inflation has been more persistent than expected
Jobless claims starting to tick up (unemployment)
Russion/Ukraine war still going
...therefore, where is the momentum to create a market bottom?
Time to buy in some areas...but who has the capital?
Home prices: mortgage rates going up, inventory going up >> sellers need to drop prices
Consumer spending will be the next correction...has been holding up well to date
- Interest rates up = debt more expensive
- Credit card debt now going up
- Wages in real terms have fallen due to inflation, therefore purchasing power down c. 2%
In the market, mainly multiple compression, but aside from Covid winners (Netflix, Zoom, Peleton etc.) earnings have been good so far, especially B2B
This could change as businesses have now shifted their focus to FCF