May 20, 2024
Good morning,
This week should be a quiet one with no U.S. economic data releases of consequence. There are plenty of Fed speakers trying to make headlines of their own this week, but with markets currently pricing in between 1-2 rate cuts by year-end, market movement is likely immune to Fed speak and is dependent on upcoming data in the weeks ahead.
Definitionally, the market correction is over, and the equity bull market has resumed. Under those circumstances, you would expect the balance of technical evidence to be positive, and it is. The equity market message calls for modest gains ahead with no signs of recession. As mentioned recently, this is the short to medium term (6-ish months) market forecast.
I had the opportunity to attend a BCA Research small group presentation last week. You may recall that BCA’s longer-term recession forecast is the fly-in-the-ointment for me and the favorable medium-term positive market message. The presentation was solid and hard to poke holes in. Their recession in late 2024 – early 2025 is based primarily on the fact that inflation and unemployment enjoy a non-linear relationship where changes happen quickly (think parabola vs. straight line). That and the consumer’s health rating is falling along several continuums: savings, credit, earnings, spending, and ultimately employment. Still, we are talking 8-ish months from now, and long-term forecasts are notoriously fickle.
We remain comfortable with the short—to medium-term market prognosis, but if BCA’s Global Strategy Team is right, we should start to see cracks in the bullish narrative in the second half of this summer or sooner.
Be well,
Mike
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