Editor's Note: Below is an excerpt from this week's edition of Market Edges, our weekly Macro newsletter of big picture financial market trends with investing implications. Click here to learn more about Market Edges.
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Darius Dale: Let’s talk about our call on Cyclical Peaks. This is how you do modern day risk management. This is about how to construct your portfolio and where not to be when the crowd is there. This theme is born out of a lot of what we discussed in terms of the run-up in U.S. domestic economic growth and inflation. Those two things worked together combined to perpetuate the cyclical peak in corporate profits and corporate profit margins. But also what we think is the cyclical peak in some of the relevant style factors that benefited from the concomitant runup in those factors. Earnings are at a glaring cyclical peak. We highlighted in the yellow boxes aggregate S&P 500 earnings expectations for the coming quarter in Tech. The Old Wall is expecting 41.9% year-over-year earnings growth for Tech stocks. And you wonder why Semis, which are the most cyclical segment of Tech stocks, are imploding. They can’t guide up on those sky-high expectations. They are now guiding down. In fact, of the first 98 companies that have guided on Q3, 76% of them have guided down. Future expectations are very important to watch. |
