When does the next QE start?

[M.W.]

Which we only need a handful of people to do. In case you have not noticed, our economies need less and less workers, more and more workloads are performed by machines and algorithms. And that trend will only increase. That means less affluent consumers.

Rather than playing stupid, why not using your brain and observe what is going on around you.

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.

 

[Zwaen]

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.

Why not? It’s just a rise in average productivity

 

[emulimu]

Which we only need a handful of people to do. In case you have not noticed, our economies need less and less workers, more and more workloads are performed by machines and algorithms. And that trend will only increase. That means less affluent consumers.

Rather than playing stupid, why not using your brain and observe what is going on around you.

Watch what you are saying. You are the one that needs to borrow brain power as clearly you don’t seem to have enough.
We simply cannot reduce the money supply to 1950s levels when the population is not at 1950s level. What would you suggest next? Reduce the population?

 

[Zwaen]

Which we only need a handful of people to do. In case you have not noticed, our economies need less and less workers, more and more workloads are performed by machines and algorithms. And that trend will only increase. That means less affluent consumers.

Rather than playing stupid, why not using your brain and observe what is going on around you.

Just like when excavators were invented, instead of using shovels, people had to work less.
Or when email was invented, paper use declined to zero levels
Ai will probably only make people more productive. Society can’t handle people working less and less hours

 

[Nine_Ender]

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.

Inflation is already coming down rapidly a good chunk of it was transitory. Even some of the most bearish of analysts are hedging their opinions these days because things aren't unfolding nearly as negative as they expected.

 

[Nine_Ender]

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.

From 2009-2013 this site had a similar environment a lot of day traders absolutely certain of carnage in markets and the economy. And anybody disagreeing with the rhetoric wasn't well received. We seem to be revisiting that type of tone here as permabears got overconfident coming out of a weak year in US markets. Some got absolutely hammered this month so they are a little ornery right now.

ps "M.W." can get real aggressive and stupid.

 

[Specterx]

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

I would love that - talk about bargains! But there are still huge mountains of investable cash sloshing around and inflation is plummeting, greatly reducing the risk of further rate increases. Allocators aren't going to just randomly sell the equity market down a further 30%, to say nothing of 50%, without a major shock.

 

[Specterx]

Which we only need a handful of people to do. In case you have not noticed, our economies need less and less workers, more and more workloads are performed by machines and algorithms. And that trend will only increase. That means less affluent consumers.

Rather than playing stupid, why not using your brain and observe what is going on around you.

Labor markets, at least in the US, are still the tightest in half a century, and that's with millions of illegal migrants pouring across the southern border. And it's jobs at the low end (construction workers, baristas) which seem to be mostly going unfilled.

If there's a future of disappearing jobs and mass unemployment, it sure isn't visible from here. Seems more likely that rapidly aging populations in many countries will lead to a near-permanent shortage of labor, not a glut.

 

[M.W.]

Sure, if the average Joe is able and willing to re-train to start writing AI code, why not. Very unlikely.

Why not? It’s just a rise in average productivity

 

[piezoe]

looking a lot like peak earnings last quarter of 2021. I consider peak earnings among most reliable harbinger of a recession. https://www.macrotrends.net/1324/s-p-500-earnings-history

The converse is always true so far as I know, i.e., it is difficult to have a recession without going through peak earnings first.