Michael Wilson: Earnings recession to get much worse

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The excellent Michael Wilson of Morgan Stanley. I can’t see why exactly the same dynamics won’t play out in Aussie earnings. Yet our market is pricing for no landing at all…


Dissecting the Cross Currents

In last week’s note, we suggested the combination of month end and a Fed that remained committed to fighting inflation could serve as the 1-2knock out punch for this rally that began in October. Based on the price action last week, it’s very hard to conclude that is the case,although it’s also hard to completely dismiss it. On the scoreboard, most will cite the performance of the S&P 500 which gained another 1.6% or the Nasdaq which rallied another 3.3% as strong evidence the rally from October remains intact. However, the more cyclical Dow Industrials was down 0.2% on the week. In fact, it’s underperformed the S&P 500 this year by 5.4%. Given that the Dow was the leadership index off the October lows and representative of the China reopening narrative to many, this more recent underperformance suggests to us that market internals are now less supportive of a cyclical rebound. We note that both the Dow and the S&P are now trading back into resistance (Exhibit 1 and Exhibit 2).

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.