Need to Know: The Fed may turn investors into stock haters just in time for the next upturn. Boomers may lead the...
A powerful, tech-led stock surge may be on the cards for Thursday, with Facebook parent Meta Platforms in the drivers seat after less disastrous than feared results.
With earnings, inflation, a COVID-19 resurgence and war all in the balance, any equity gains could easily disappear in another sell-the-rip move. Wariness abounds as gross domestic product data loom, along with Amazon and Apple results due later.
On to our call of the day from TS Lombards chief U.S. economist, Steven Blitz, who sees the golden era of Fed-controlled equity markets coming to an end. (h/t The Market Ear).
As Blitz explained, if equity market weakness continues, with the S&P 500 SPX, +0.21% down 12% year to date, consumers may slash spending by the end of this year, if not sooner.
The Feds communicated policy trajectory was intended to weaken equities equities and the dollar are the Feds main conduits to impact the economy and, in turn, inflation, said the economist, in a recent note. An acceleration of current market weakness adds to our expected near-term downswing in spending and, more critically, threatens to embed a much weaker outlook for spending heading into next year.
As for the connect between consumer spending and stock market performance, Blitz noted ties have tightened up since the global financial crisis of 2007-08, when households reacted by long-tail deleveraging of their balance sheets. He talked about how that sparked the Feds creation of an asset cycle centered on stocks, and households charged into equities because TINA [There is No Alternative] and the market only goes up, right?
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