The Fed Pivot and the Future Implications for Earnings Valuation

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Most of the rally from late 2022 has been completely driven by multiple expansions. Why have these multiples been expanding then when the market knows what's happening in the economy? Things are expected to get worse. What is driving that higher price in valuations? And then I guess you kind of touched on this: But what does that have for the future implications for earnings valuations then? Look, it's really a muscle memory of markets wanting to pay up to frontload the Fed pivot. That inflation we trend has started. No inflation is still high, but it is at least trending down. And people are happy to pay up.

Rebecca Hotsko and Alfonso Peccatiello discuss the current market outlook, including the driving force behind the market rally, its sustainability, Alfonso’s prediction of a 0% rate cut by the Fed in 2024, and a whole lot more!

Alfonso Peccatiello is former Head of a $20 billion Investment Portfolio and now is the Founder and author of The Macro Compass, which is an investment strategy firm that provides financial education, macro insights and investment ideas.

IN THIS EPISODE, YOU’LL LEARN:

00:00 - Intro.

02:05 - His current market outlook, whether this recent market rally is sustainable or not.

10:43 - Why Alfonso expects the Fed to cut rates to 0% in 2024?

22:07 - How the long-term debt cycle works, what are the key factors that drive it over time?

29:27 - Why Alfonso believes we are in the very late stages of the long term debt cycle?

33:41 - What implications does this has economically, and for the financial markets?

34:02 - Will we see a period of deleveraging similar to 2008 and 1929 in the US?

41:11 - The difference between a period of deleveraging and a recession.

50:22 - His thoughts on the trend of de-dollarization, is a US dollar centric world over and are there any possible alternatives to this dollar central world?

54:49 - The Impacts that an economic downturn and de-leveraging would have on a US dollar based global system.

60:09 - Alfonso’s portfolio strategy and investment take-aways given his outlook.

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

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Related Episode: Listen to MI232: Understanding Quantitative Easing w/ Alfonso Peccatiello , or watch the video.

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