Thoughtful Money with Adam Taggart Unprecedented, Unusual, Challenging Economy More Bifurcated Than Ever | Michael Kantrowitz
Why The Market's Calm Today Masks Hidden Risks Ahead
The economy remains uniquely bifurcated with strong winners like AI sectors and weak areas like housing showing regional disparities.
Michael Kantrowitz explains the HOPE framework to track economic health (Housing, Orders, Profits, Employment) and shows many indicators stuck around neutral levels, reflecting a sideways and slow-moving economy.
He warns that the market is well-positioned for earnings to grind higher but valuations are elevated, making the market vulnerable to shocks or surprises that could provoke sharp downturns.
Kantrowitz advises positioning portfolios towards larger, fundamentally strong companies and emphasizes active management to find alpha, given increasing bifurcation and idiosyncratic risks.
He stresses markets go down not because they are "expensive" but because "something bad happens," mostly via rate shocks, employment spikes, or exogenous shocks like tariffs.
> Markets don't go down because they're expensive. They go down because something bad happens. — Michael Kantrowitz
Unusual, Bifurcated Economy
- The economy remains unusual and bifurcated due to COVID's impact but shows overall stability at a high level.
- Some sectors, like housing, are weak while others, such as AI, remain strong and growing.
HOPE Framework Signals No Recession End
- The HOPE framework tracks economic health through Housing, Orders, Profits, and Employment.
- Housing weakness continues without a rebound, indicating no recession end yet; the economy is still circling the runway.