Savvy Trades and Investments

[wadegarret]

Fed will stay higher for longer IMO

After listening to dozens of analysts, I feel the market at 4000 S&P is a good bit too high. Last week I mentioned that Jeremy Siegel said that PEs during recessions were 20-24 going forward. However I was able to find this article that states that PEs almost always go below 10 during recession lows....https://seekingalpha.com/article/317930-p-e-ratios-in-recessions

So what I'm saying is, I disagree with Jeremy, and feel that there's no way PEs should be anywhere close to 20 going forward. No way either that earnings won't suffer from higher for longer fed rates. I think this market has extrapolated from the recent PCI numbers that since all inflation has come down so quick, that going forward, we won't have a problem much longer. I fervently disagree. Two things. First, just because inflation is waning at a certain rate, one shouldn't extrapolate that this pace will continue. Many analysts have pointed out that getting inflation down to 4% or so is the easy part, but getting down to 2% is a different story. Second, the Fed cares first and foremost about service inflation, which has actually increased the last few months. Job demand is not waning, and it's hard to believe wages will come down much more, while demand remains hugely higher than supply(1.7 to 1).

I therefore at S&P 4000, am very defensive. I picked GERN recently, but only because their story is so rare, and the drug they provide could possibly cure a rare blood cancer. I also picked INMD, but that pick may be short lived. Bottom line is, I think the market has it wrong and is over extended, and is extrapolating way too much, as well as hoping the China reopening will save things. I believe this market will succumb to the fed eventually, not the other way around. Time will tell