NEPCG’s Market Updates: Thinking Out Loud
Pike’s Market Updates: Thinking Out Loud
April 15, 2025: President Trump appears to have blinked. Our question is, is it twice for
distress or once for relief? In recent days, the Trump Administration has walked back certain
tariff salvos to a less aggressive 10% blanket policy in many cases, although certain sectorial
tariffs remain. And of course, the inordinately high tariff level remains on China. We have
repeatedly advised clients to trust Trump for who he is. We previously questioned whether, if
pundits had not positioned Trump’s tariff policy as a negotiating stance, would Liberation
Day have brought such an aggressive level of duties? We remain torn, even today…. READ MORE
April 3, 2025: Trump appears indifferent to the near-term impact on capital markets. His tariff policy increasingly presents a binary outcome—either highly effective or deeply misguided. The challenge for investors is that it may take 12 to 18 months for the results to become clear. This raises questions about whether Trump has sufficient time, and whether his base—both voters and legislators—has the patience and resolve to endure the economic pain the Administration has signaled will follow, especially heading into the midterm election cycle… READ MORE
March 6, 2025: Equity markets are in the midst of another growth scare, not totally driven by inflation pressures but rather mostly by policy uncertainty stemming from unconstrained Trump 2.0, in our opinion. But it is not just here in the U.S. where policy is disrupting the economy and capital markets. As we pointed out in our 2025 Outlook, 2024 witnessed national elections across 60+ countries, representing 50% of global GDP. Most recently, we had a national election in Germany, resulting in a right-leaning coalition…READ MORE
January 2025: Miles To Go And Promises To Keep: The post-pandemic era continues to bring unprecedented economic and geopolitical challenges. In 2024, national elections across 60+ countries representing 50% of global GDP will shape politics, policy, and capital markets. Expect the unexpected in 2025, as geopolitical uncertainty remains high, laying the foundation for potential disruptions and surprises. Despite potential challenges, we remain opportunistically cautious in the near term for both the economy and capital markets. While expansionary fiscal policy and deregulation may provide a modest boost to GDP by late 2025 and early 2026, tariff uncertainty and immigration restrictions may result in persistent inflation and higher interest rates. The Fed may need to choose between curbing inflation or supporting the labor market and… READ MORE
September 17, 2024: Between March 2022 and July 2023, the Federal Open Market Committee (FOMC) increased the Federal Funds Rate 11 times, from a range of 0.25-0.50% to 5.25-5.50%. On Wednesday, September 18th, the FOMC will hopefully announce the highly anticipated start to the next rate-cutting cycle. The big questions for investors are, how much? 25bps or 50bps? Further, what is the cadence of future cuts, and how hawkish or dovish will the FOMC be?… READ MORE
August 2, 2024: Between March 2022 and July 2023, the Federal Open Market Committee (FOMC) increased the Federal Funds Rate 11 times, from a range of 0.25-0.50% to 5.25-5.50%. This represented the most aggressive tightening cycle in the last half-century. This past week, the FOMC met for the fifth time in 2024, leaving the overnight borrowing rate unchanged for the ninth consecutive meeting. However, dovish commentary in both the prepared FOMC statement and during Chairman Powell’s press conference… READ MORE
July 24, 2024: In our 2H24 Halftime Update, we suggested investors could expect near-term volatility across capital markets driven by mounting evidence of a slowing economy combined with uncertainty surrounding the 2024 U.S. Presidential Election These concerns were amplified following the first Presidential Debate. Since publishing that note, markets have endured events that have increased geopolitical instability, which has the potential to shock capital markets further… READ MORE
July 1st, 2024: Hold On Loosely But Don’t Let Go: The broader economy is finally showing signs of slowing. Monetary policy’s unprecedented influence on the U.S. economy and capital markets following the COVID-19 pandemic remains evident today. While consumers and businesses strive to normalize behaviors, elevated price levels caused by generationally high inflation have only begun to decelerate meaningfully enough to impact consumer’s wallets… READ MORE
January 2024: Avoid Making Wrong Mistakes: On the surface, the 2023 economy was resilient. However, from our perspective, we remain stunned by the complacency of capital markets – as if many investors and pundits have been anesthetized by the mounting domestic/global economic, geopolitical, and capital market headwinds forming. As usual, Wall Street focuses on the optimistically probable versus realistically skeptical. Investors should never entirely discount black swan events, especially in a year of a U.S. Presidential Election and… READ MORE
September 21, 2023: YTD, the S&P 500 has provided investors with a 16% total return, roughly 5% greater than our original year-end 2023 expectation published in our 2023 Outlook. However, the year is not over. We remain puzzled about the resilience of the capital markets, given current valuations combined with the deluge of negative headlines and potential for geopolitical and economic disruption, which we highlighted in our recent note entitled “The Dog Days Are Here.”… READ MORE
September 5th, 2023: Fairy tales are more or less, Western fables/folklore meant to help instill morals or teach life lessons to children in a calming fashion. However, original fairytales of the early 19th century were much darker than we know them to be today. For example, in the beloved children’s fairy tale of Goldilocks and the Three Bears, there was never even a “Goldilocks” character. Instead, the protagonist is an older and deceitful grifter who stumbles upon a vacant home in the forest…READ MORE
August 18th, 2023: The dog days of summer are starting to present a “tails we lose, heads we lose” outcome for investors. As of the close on 8/17/2023, the S&P 500 was higher by 15% YTD, while Corporate Bonds were up only 1.4%. Historically dating back 20 years, August has provided investors with the second worst return month for the S&P through the summer season, leading to into the worst month overall, September. While several pundits and investors are leaning into a “soft-landing” or “no-landing” scenario…
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September 8th, 2023: We continue to wait for the most anticipated recession in modern times to materialize, despite posturing by the Federal Reserve1 and several sell-side Wall Street firms2 either pushing back recession timing or entirely capitulating to the “soft-landing” camp. The most recent flip-flop comes from Bank of America/Merrill Lynch3. We remind investors that soft landings have occurred only three times4, dating back over the eight (8) recessions since 1961…READ MORE
July 25, 2023: Thank you for reading the first installment of our new periodical, “Thinking Out Loud.” We will frequently share our coarse thoughts relating to capital markets and economic trends. Today’s installment is entitled “Let The Good Times Roll.” We believe there is a duality in life and art. As such, we are reminded of a song from one of my beloved and formative bands growing up, The Cars. The first track of their debut album was “Let the Good Times Roll.…READ MORE
July 1st, 2023: For the first four months of 2023, we recommended clients to Overweight the Technology Sector. This recommendation was driven by our expectations for a more dovish rate environment in 2023 combined with the significant 28% retracement in Technology shares in 2022. In late April 2023, we then adjusted our positioning toward Technology and removed our Overweight bias given our concerns regarding Technology valuations. However, the combination of better-than-expected…READ MORE
January 2023: Great Expectations: We can’t remember a time over the last 20 to 30 years when consensus expectations for capital markets and global economies have been so synchronized. So in our ’23 Outlook, we try to avoid the herd mentality of the great consensus expectation unless we can find the evidence to support it. 2022 started on solid footing. Shares of Apple (ticker: AAPL) reached an inter-day all-time high of.…READ MORE
July 1st, 2022: While COVID continues to disrupt a classic economic life cycle, we still believe the U.S. economy remains below peak levels and is somewhere just shy of halfway to its peak. However, the exact location on the economic life-cycle curve is unknown given both the idiosyncratic nature of a global pandemic and the unprecedented fiscal and monetary response from international central bankers…READ MORE
January 2022: Two Roads Diverge: 2021 started on relatively solid footing following the tumult offered up in 2020. During the first quarter of 2021, the S&P 500 increased by 6.2%, while the NASDAQ and Dow registered gains of 3.0% and 8.3%, respectively. Most bond indices were down through the first 90 days of 2021, led lower by longer-duration government bonds, as the 10Yr U.S. Treasury (10Yr TSY) backed-up1 by over 80bps (0.8%) to 1.74%. Despite the U.S. economy’s slower than expected start in 2021…READ MORE
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On the surface, the 2023 economy was resilient. However, from our perspective, we remain stunned by the complacency of capital markets – as if many investors and pundits have been anesthetized by the mounting domestic/global economic, geopolitical, and capital market headwinds forming. Investors should never entirely discount black swan events, especially in a year of a U.S. Presidential Election and during a period when our country has never been so divided. Based on our research and analysis, we believe the U.S. may have already entered a recession, a prognostication we do not take lightly. And while the “better late than never,” FMOC finally recognized an inflation threat not seen since the ‘70s, we now believe a misguided “dovish pivot” by the FOMC in late 2023 may have positioned investors as being too optimistic regarding 2024 rate-cut expectations. As a result, we believe investors may have already “pulled forward” much of 2024 returns during November and December 2023. As a result, we estimate a fair value for the S&P (price-only) of between 4,900 and 5,000 (a 6-7% total return from year-end 2023) during 2024. Enjoy our 2024 Outlook, and we would love to hear your thoughts. Read more about our views herein.
Halfway through 2023, we are surprised by how resilient the U.S. economy is. We are more surprised by how robust the U.S. equity markets are. However, as we continue to “take nothing on its looks and take everything on evidence,” we find that, except for the labor market, broader economic trends warrant caution. Further, the YTD surge in the S&P 500 remains driven by seven Large-Cap Technology stocks. We remain steadfast in our recession expectation for later this year and believe equity valuations will encounter headwinds. Fixed-income investments remain exposed to manic economic releases and a Federal Reserve determined to eliminate inflation threats at any cost. Our 2023 Half-Time Update evaluates our “expectations” from our 2023 Outlook and frames our thoughts moving forward. Read more about our views herein.
We can’t remember a time over the last 20 to 30 years when the consensus expectation for capital markets and global economies have been so synchronized. In our 2023 Outlook, we try to avoid the herd mentality of the great consensus expectation unless we can find evidence to support it. In doing so, we unpack our views on the economy, inflation, and recession. Finally, we provide our expectations for capital market returns in 2023. Read more about our views herein.
While COVID continues to disrupt a classic economic life cycle, we still believe the U.S. economy remains below peak levels and is somewhere just shy of halfway to its peak. However, the exact location on the economic life-cycle curve is unknown given both the idiosyncratic nature of a global pandemic and the unprecedented fiscal and monetary response from international central bankers. Read more about our views herein.
2021 started on relatively solid footing following the tumult offered up in 2020. During the first quarter of 2021, the S&P 500 increased by 6.2%, while the NASDAQ and Dow registered gains of 3.0% and 8.3%, respectively. Most bond indices were down through the first 90 days of 2021, led lower by longer-duration government bonds, as the 10Yr U.S. Treasury (10Yr TSY) backed-up1 by over 80bps (0.8%) to 1.74%. Over the past 18 months, U.S. policymakers took unparalleled actions to resuscitate a faltering global economy through slashing interest rates and unprecedented quantitative easing. However, we believe the Federal Reserve Open Market Committee (FOMC) has unintentionally painted itself into a corner. Read more about our views herein.
2019 was the year of the “everything rally.” Investors’ fear of missing out (FOMO) combined with there is no other alternative (TINA) has helped offset the 4Q18 sell-off. The geopolitical outlook remains uncertain and poses a significant risk to any economic and capital market outlook going forward. While the current capital market and economic cycle seem extended from a historical perspective, most sell-side analysts, strategists, and portfolio managers believe there is still room for markets to run. However, we see economic cracks forming, and fear the unintended consequences for capital markets associated with near-zero global short rates. Read more about our views herein.