When does the next QE start?

[Scataphagos]

S&P 1800? I am no expert on macroeconomics but I can confidently say we will never see 1800 again.

So... where does the notion of "SPX 1800" come from?
Historically, SP 500 P/Es have been 8x-12x earnings at bear bottoms. (Currently, 18-20x). Latest earnings estimate I've seen is $180. "Times that" by 8 = 1440..... by 12 = 2160. Mid-point ~1800. Just a thought for now.

 

[murray t turtle]

S&P 1800? I am no expert on macroeconomics but I can confidently say we will never see 1800 again.

%%
LOL no way you could predict that\ but as as practical matter SPY closing above 200dma/$393.93= no way is SPY crashing to $180.Actually a big bear this year could donwntrend SPY to$180[1800 S&P500], but unlikely.
NEVER say never\ '' i can say confidently'' even with[100%] perfect hindsight; note it was unlikley for SPY to take out 2000-2002 bear low\ in 2008 bear\ but it did.
WE cant even predict a 00.25 rate hike; we used to gamble for quarters ina pool hall\
not that Mr Powelll is a gambler or trading is like gambling\ its not
Like mr Powell sang;
''Star of wonder /star of light guide us by thy perfect light''\/

 

[emulimu]

Fed will bet that people need salary more than savings and quantitative easing will start. SPY 480 to 380 caused so many job losses. Another 100 point loss to 280 and another from 280 to 180 will end the world as we know it.

 

[M.W.]

And this misguided thought is exactly what will end up in capitulation and cause another 30-50% move down.

QE will be resumed as soon as there's a scary drop in the market. IMO and in this context the "Pause" will be a sell-the-news event.

 

[M.W.]

Don't think so, but what will happen is that people will need to realize that the economy might not offer enough jobs to employ two income earners in each home, meaning, they need to cancel a lot of things on their bucket lists and sell some of those expensive toys or return them as most are bought on credit anyway.

The economy will function perfectly fine without zero percent interest rates and QE but it will force a rethink of consumption and profit margins.

Fed will bet that people need salary more than savings and quantitative easing will start. SPY 480 to 380 caused so many job losses. Another 100 point loss to 280 and another from 280 to 180 will end the world as we know it.

 

[emulimu]

Don't think so, but what will happen is that people will need to realize that the economy might not offer enough jobs to employ two income earners in each home, meaning,

meaning people need to realize women should quit jobs and return to 1950s? Are you for real?

 

[Clubber Lang]

S&P 1800? I am no expert on macroeconomics but I can confidently say we will never see 1800 again.

Why not?
Market was there in Jan 2016. Not uncommon to give up 5 years of gains in a Bear market.

 

[Arnie]

But, during high inflation environments, the trailing PE for the S&P is much lower than average:

• From the 1972 peak to 1974 trough, the trailing PE went from 20x to 7x as CPI rose from 2.3% to 12.7% with the S&P losing nearly 48% from peak to trough.
• For nearly the last 70 years, whenever CPI has been above 3% the trailing PE has averaged 15x. Whenever CPI has been above 5%, the trailing PE has averaged 12x.

Based on this data, we believe that reductions in S&P earnings estimates and further multiple compression will drive the next market move lower. Earnings estimate reductions started for the first time in two years with the Q2 earnings season results and Q3 guidance. The EPS in 2021 for the S&P was $193. The estimate for CY22 is for EPS to expand to $219, which is down from the prior estimate of $229 before the Q2 earnings season. Similarly, the estimate for CY23 is for EPS to expand to $234 in 2023, which is down from the estimate of $252 at its peak in June before Q2 earnings.

We think the estimate for CY23 will eventually be closer to $200 from its peak of $252 when looking at earnings reductions during prior recessions. In 2022 these estimate cuts led to drops in the stock market and we believe the same will hold for 2023.

Our single point price target for the market bottom on the S&P is 3000 derived from 2023 S&P EPS of $200 with a 15x multiple. At the low end we can see the S&P reach 2400 based on a 12x multiple which is not unreasonable at inflation levels above 5% historically.

 

[M.W.]

Nobody said that, perhaps you need to sit out the next round? Well, do the basic math on the economy, you will figure it out, it's really just 7th grade math.

meaning people need to realize women should quit jobs and return to 1950s? Are you for real?

 

[emulimu]

Nobody said that, perhaps you need to sit out the next round? Well, do the basic math on the economy, you will figure it out, it's really just 7th grade math.

World doesn’t need to go through your 1929 kind of depression when we can engineer the economy. Nobody needs your 7th grade basic math kind of economy. What we need is more financial engineering, more innovation.