"Massive Deviation" Between The Markets & The Economy | Lance Roberts & Adam Taggart
Jul 6, 2024
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Portfolio manager Lance Roberts warns of a massive deviation between stock valuations and earnings growth, predicting asset price reductions. Topics include market technicals, inflation data, rate cut odds by the Fed, sentiment importance, and recent trades.
Stock valuations are exceeding earnings growth, posing an unsustainable scenario.
Economic growth slump may trigger necessary asset price corrections for balance.
Market forecasting involves risk management strategies like adding hedges and rebalancing portfolios.
The 20-day moving average plays a crucial role in determining market trends and supporting strategies.
Deep dives
Market Deviation from Economic Activity
The podcast episode discusses the current significant deviation in the markets from the actual state of the economy. The earnings are not aligning with the economic activity expected by Wall Street and investors. Concerns are raised about the sustainability of this economic market disparity if the economy continues to slow down.
Power Outage and Unexpected Events
The speaker shares a personal experience of a massive power outage caused by cable line issues. This unexpected event led to disruptions in the household, with electrical problems impacting various appliances and even causing safety concerns due to lack of grounding. The story highlights the unpredictability of unexpected events that can disrupt daily life.
Challenges Amid Personal Struggles
Amid personal struggles, the speaker reflects on the resilience required to navigate through difficult times. The story emphasizes the importance of maintaining optimism and gratitude amidst various challenges, such as power outages, family health issues, and work-related stress.
Market Forecasting and Risk Management
The discussion explores market forecasting and risk management strategies in response to potential market corrections. It involves proactive measures such as adding option hedges, adjusting equity risk exposure, and rebalancing portfolios to prepare for potential market fluctuations. The approach emphasizes adaptability and readiness to respond to changing market conditions.
Market Analysis and Moving Averages
The importance of the 20-day moving average in determining market trends is highlighted. Trading patterns around the 20-day moving average and its impact on strategies for buying and reducing risk are discussed, emphasizing its significance as a support level during bull trends.
Inflation and Rate Cut Speculations
The podcast delves into the topic of inflation and its potential impact on rate cuts. Discussion revolves around the interpretation of key statements from market influencers like Powell, examining the likelihood of rate cuts based on economic data including employment reports and CPI changes.
Lessons on Self-Belief and Business Success
Personal anecdotes are shared to underscore the importance of self-belief, risk-taking, and persistence in pursuing career goals. Insights from a cabinet maker's entrepreneurial journey and reflections on embracing failure as a stepping stone to success are emphasized as crucial elements in navigating the challenges of capitalism and achieving personal fulfillment through business ventures.
There is a massive deviation between stock valuations and earnings growth: growth in the former is far outpacing the latter.
This is unsustainable warns portfolio manager Lance Roberts.
And unless economic growth suddenly surges (and no catalyst for that is on the radar), then asset prices will need to come down in order to bring the ratio back into balance.
And with GDP growth coming in at1.4% in Q1 and currently at 1.7% (and slowing) here in Q2, asset price reduction indeed seems like the more probable outcome.
In this video, Lance and I discuss this, as well as market technicals, whether the latest inflation & jobs data increase the odds for a near-term rate cut by the Fed, the importance of sentiment, the latest market technicals and Lance's recent trades.
If you like the new studio background, it was created by Inspired Spaces Designs. They do great work and can be contacted through their website https://inspiredspacesdesign.com/ & their Instagram https://www.instagram.com/inspiredspacesinc/
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#earnings #stockmarket #inflation
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