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Kantro Profile picture
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Oct 13 • 4 tweets • 3 min read
Love your stuff @AndreasSteno but I have to emphatically disagree with your conclusion here. It wasn’t peak CPI that lifted stocks, it’s was Fed rate cuts followed by a HUGE eco recovery (PMIs 🆙, claims ⬇️), as CPI happen to peak, that did it IMO. Charts (2) speak for themselves
PMIs are only trending one direction for a while - same for housing. Same reasons we called BS on the market rally in August - wasn’t consistent with EVERY other market low
Just watch housing starts and ISM new orders. No new bull markets until they are rising (or about to do so). #macro $SPY
Last one - pivot did NOTHING in 1974. No rally. Why? It was too late - recession already in full swing (falling housing, PMIs, EPS and rising claims). #macro #HOPE

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More from @MichaelKantro

Kantro Profile picture
Aug 16
Bear market rally #4 update. The inflation & interest rate bear market is likely behind us. What's next? The market needs fundamental support to continue higher - that's not coming for several more quarters. Another bear market is coming - earnings & employment. My 2c #macro $SPY
Respect the LAG of food and energy inflation ...
Respect the LAG of Fed rate hikes ...
Read 4 tweets
Kantro Profile picture
May 20
Why do markets bottom? It’s the economy.

Not sentiment, cash levels, valuation, drawdown %, or day of the week. A Fed pivot, on its own, only led to a rebound in ‘87 and ‘18. The other 19 material sell offs since 1950, it was leading indicators of the economy. #macro $SPY 1/2 Image
Who is feeling lucky? Image
Why is the economy? Because that what drives earnings and risks (P/Es). Image
Read 4 tweets
Kantro Profile picture
May 9
1/3 … When will P/Es stop falling?

Answer: when risks stop rising.

Rising rates, inflation and oil have been the risks YTD in 2022. The next big risk will be declining EPS estimates and widening credit spreads. That risk won’t PEAK until PMIs bottom.
2/3 It’s a misconception that stocks are falling BECAUSE they are expensive.

Stocks are falling because rates and risks are rising.

Stocks P/Es began falling as interest rates began rising. Next, cyclicals’ PEs will decline as credit spreads rise and EPS fall.
3/3 stock valuations decline from ANY level, high or low, when risks rise. We’ve had plenty of bear markets that begin with below avg P/Es. 2008 was one of them. #macro $SPY
Read 4 tweets

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