Joseph Little of HSBC Asset Management told Bloomberg, “There’s maybe a nasty surprise in store for stock markets and credit markets in the second half of the year… [That could stem from a] combination of the weaker fundamentals set against what is currently expected by market participants, which looks like an incredibly soft landing.”
What Joseph Little is likely referring to is the disconnect between the performance of the stock market and the deteriorating macroeconomic data.
Macroeconomics is a branch of economics that focuses on the behavior and performance of an economy as a whole. It analyzes various economic indicators such as gross domestic product (GDP), inflation, unemployment rates, and government policies to understand and explain the overall functioning and trends of an economy. Macroeconomics examines the relationships between different sectors of the economy, such as households, businesses, and the government, as well as international trade and financial markets. It aims to provide insights into the factors that influence economic growth, stability, and fluctuations on a national or global scale.
The story for all of 2023 has been the disconnect between macroeconomic data and the performance of the stock market.
The market exists to screw the greatest number of traders at any given time.
The slowdown in the economy from rising interest rates pulled forward a lot of the weakness in the economy into the stock market in 2022. However, consumer spending doesn’t usually take a hit until about 15 months after the first rate hike by the Federal Reserve. That 15th month was June 2023.
There were too many traders on the bearish side of the trade and so, 2023 so far has been the year of screwing those bears. The issue now though is that FOMO has taken hold and so the second half of 2023 might be for screwing the bulls that chase this rally higher from here.
Q2 Earnings Season Is Upon Us
Over the next couple of weeks, Q2 earnings season kicks off. This may be the last quarter that most companies will be able to report robust consumer spending. Forward guidance and how much macroeconomics is slowing earnings and The income statement provides a summary of a company's revenue and expenses over a specified period of time, typically a year or a quarter. It shows the company's total revenue, th... will be the key focus of investors.
Investors and strategists are also concerned that bad news for the megacap tech group could exacerbate declines for equity gauges overall because this year’s market rally has been concentrated in a small number of megacap tech stocks. The market rally needs to widen out because it is currently too narrow if we want to sustain the current uptrend.