SPY: Fortunes Will Be Made For The Brave

Seeking Alpha2023-03-08

SummaryFed Chair Jerome Powell gears up for his two-day congressional testimony. Investors brace themselves for a potential shock that could shatter the recent market exuberance.Despite hawkish ...

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Chaishen
·2023-03-09
Thanks for sharing, support small position call[Miser]
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RL7741
·2023-03-08
Good sharing [Smile]
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NeedMoneyPls
·2023-03-08
Too many words. Someone tell me if I shld YOLO my life savings into calls or puts
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Investors brace themselves for a potential shock that could shatter the recent market exuberance.Despite hawkish ...</p>\n\n<a href=\"https://seekingalpha.com/article/4585185-spy-fortunes-for-brave\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":null,"symbol_name":null,"start_time":0,"source_url":"https://seekingalpha.com/article/4585185-spy-fortunes-for-brave","article_id":"1126250715","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1126250715","pubTimestamp":1678267045,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SummaryFed Chair Jerome Powell gears up for his two-day congressional testimony. Investors brace the","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{},"translate_title":"间谍：勇敢的人会发财","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SPY":0.9},"content_text":"SummaryFed Chair Jerome Powell gears up for his two-day congressional testimony. Investors brace themselves for a potential shock that could shatter the recent market exuberance.Despite hawkish remarks from certain Fed officials, the S&P 500 made a comeback last week after four weeks of market turbulence and pullbacks.As the market teeters on a precarious edge, investors weigh the potential for a harsh economic downturn and the threat of a more hawkish Fed.Despite the recent headwinds, market operators may be bracing for a glimmer of hope. Is the worst really behind us, or is this just a fleeting moment of optimism?As the market is forward-looking, we've loaded up during the recent market pullback in anticipation of the next potential upward surge to challenge December's highs.Fed Chair Jerome Powell prepares for his two days in Congress (March 7 and 8) as investors and traders brace for potentially nasty surprises that could set the expectations heading into the Fed's upcoming FOMC meeting.The market has shrugged off the pullback through last week from its early February highs (which we cautioned previously), as investors bet that the worst of the Fed's hawkish stance could have been priced in.Interestingly, the S&P 500 (SPX) (NYSEARCA: SPY) was weak early last week as investors dealt with nearly four weeks of volatility after a remarkable January 2023 recovery.However, buyers returned late into the week, even as Fed officials came out with guns blazing, suggesting that the market recovery could have gone too far.President of the San Francisco Fed Mary Daly highlighted last week that \"interest rates will likely need to be raised higher and maintained at elevated levels for a longer period to combat high inflation.\"Fed Governor Christopher Waller also added to the hawkish commentary, supporting a more hawkish stance to combat elevated inflation if required by the data. He stressed that \"wishful thinking is not a substitute for hard evidence.\" Notably, Waller added that:Recent reports show stronger hiring and spending in January than forecast, along with slower progress on reducing inflation. Recent data shows consumer spending isn't slowing as much as anticipated.-WSJWith Fed officials lending their voices to mitigate the market's exuberance, why did the SPY react positively late last week? Are market operators living in the delusion that they aren't prepared for higher interest rates?However, interest rate futures have already adjusted upward, with peak rates now expected to be close to 5.5%, above the Fed's 5.1% median target rate for 2023, updated in December.Hence, it's pretty clear that market participants are not ignoring the risks of a more hawkish Fed by pricing in higher rates ahead of the Fed's next summary of economic projections or SEP update.But isn't that supposed to lead the SPY down further, as investors adjust to a higher risk of recession, causing earnings to crumble? As such, it should lead to a hard landing, behooving the market to price in significant value compression.The SPX last traded at a next-twelve-months or NTM normalized P/E of 17.9x, relative to its 2023 P/E of 18.3x. Both metrics are above its 10Y average of about 17.7x. As such, the market has already moved above the below-average valuations at the SPY's October lows.The bullish argument suggests that the market had already reflected the risks of a \"rolling recession,\" as articulated by Edward Yardeni.In his March 6 commentary, Yardeni emphasized that the economy is in a rolling recession, highlighting \"downturns that affect specific industries or regions, but not the broader economy.\"As such, Yardeni argued that a hard landing could be avoided. Hence, the most anticipated recession of recent times should be viewed from the correct perspective and not the doomsday scenario painted by the financial media in general. Yardeni articulated:The current recession may be a rolling one, with different sectors of the economy being affected at different times. The single-family housing market was the first to be affected, followed by industries that produce and distribute goods, the tech industry, and the office real estate market. The downturn could be a mild recession rather than a bad one, with a protracted \"growth recession\" hitting different sectors of the economy at different times. -Yardeni Research 6 March 2023 morning briefFormer Fed vice chair Alan Blinder highlighted his optimism in the Fed's ability to \"engineer a soft landingto tame inflation without triggering a recession.\" He also doesn't expect the need for the Fed to hike rates to 6%, triggering the doomsday scenario that could potentially set off a hard landing.As such, we believe that the market is optimistic but not ignorant of the risks that a debilitating recession could occur.However, the market is forward-looking. As such, it could have priced in the risks of a \"rolling recession\" in October 2022 when SPY's valuation fell below its 10Y average.Moreover, it has also priced in the likelihood of a more hawkish Fed, as seen in the interest rate futures. So, how is the market ignorant of these headwinds?With the carnage seen in the market since the Fed went on a hiking rampage, do investors really think that market operators have not learned? We don't think so.SPY price chart (weekly) (TradingView)Under the hood, the SPY has continued to grind higher from its October 2022 lows, forming higher lows, including last week's bottoming process.Retaking the SPY's December 2022 and February 2023 highs will be the market's next critical move. If successful, it should then open up a further upward move to August highs before another consolidation is expected to shake out some late FOMO buyers.The SPY's price action is also supported by the broadening of the recent advance, as risk-on sector ETFs have outperformed the defensive ones.Accordingly, \"defensive sectors are driving the expansion in the percentage of one and three-month lows\" last week, higher than the lows seen in sectors like consumer discretionary.Based on backtesting historical data points, it augurs well for the recovery thesis, with the \"S&P 500 [showing] a strong tendency to rally over the next few months.\"Hence, investors who took advantage of the recent pullback through last week should be confident and not fear the doom and gloom portrayed in the financial media.Rating: Buy (Revised from Hold).","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9949303633,"gmtCreate":1678337784922,"gmtModify":1678337789110,"author":{"id":"3575102877976288","authorId":"3575102877976288","name":"Chaishen","avatar":"https://static.tigerbbs.com/b8bb167c6f990b4a02d66313039eb021","vip":1,"hat":"https://static.tigerbbs.com/7b75ce0c34afff716602792a5d0929dd","crmLevel":5,"crmLevelSwitch":1,"idStr":"3575102877976288","authorIdStr":"3575102877976288"},"htmlText":"Thanks for sharing, support small position call[Miser]&nbsp;&nbsp;","listText":"Thanks for sharing, support small position call[Miser]&nbsp;&nbsp;","text":"Thanks for sharing, support small position call[Miser]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9949303633","repostId":1126250715,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9949073002,"gmtCreate":1678269982606,"gmtModify":1678269985213,"author":{"id":"3585382015740768","authorId":"3585382015740768","name":"RL7741","avatar":"https://community-static.tradeup.com/news/cc534d52d2b9325d1a2e19f4cf928bc2","vip":1,"crmLevel":4,"crmLevelSwitch":1,"idStr":"3585382015740768","authorIdStr":"3585382015740768"},"htmlText":"Good sharing&nbsp;[Smile]&nbsp;","listText":"Good sharing&nbsp;[Smile]&nbsp;","text":"Good sharing [Smile]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9949073002","repostId":1126250715,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9949047524,"gmtCreate":1678267903968,"gmtModify":1678269945635,"author":{"id":"3577168442576973","authorId":"3577168442576973","name":"NeedMoneyPls","avatar":"https://static.tigerbbs.com/ae9445a785e57d1d8607eb2ae0dde618","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":8,"crmLevelSwitch":1,"idStr":"3577168442576973","authorIdStr":"3577168442576973"},"htmlText":"Too many words. Someone tell me if I shld YOLO my life savings into calls or puts","listText":"Too many words. Someone tell me if I shld YOLO my life savings into calls or puts","text":"Too many words. Someone tell me if I shld YOLO my life savings into calls or puts","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9949047524","repostId":1126250715,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":40,"commentSize":3,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false}}