S&P 500, on Thursday, is holding on to its gains from last night after the Bureau of Economic Analysis said the core personal consumption expenditures price index eased to 5.0% in October.
For the month, Fed’s preferred inflation gauge was up 0.2% versus a 0.3% increase expected.
A day earlier, Chair Powell signalled a 50-bps increase in December and said he still saw path to a soft landing that we reported here. Still, Cameron Dawson of NewEdge Wealth on CNBC’s “Squawk Box” recommended caution since earnings estimates are still too high.
I think as the market continues to trade higher, the risk-reward becomes increasingly unattractive. If we look at earnings still needing to come down for next year, it gets a bit more treacherous the more we trade higher.
To that end, she recommends only investing in stocks that are still trading at reasonable valuations.
Also on Thursday, BEA said spending was up 0.8% in October – roughly in line with expectations while personal income gained 0.7% – well above the 0.4% estimate.
PCE inflation including food and energy increased 6.0% on a year-over-year basis – a step down from 6.3% record in September. Still, Dawson fixated on “earnings growth” as a prerequisite of a new bull market.
In order to get back up to prior highs and start a new bull market past those prior highs, we have to see it come from earnings growth. We have to grow into those high valuations.
For the year, the S&P 500 is now down about 15%.
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