🔥More Uncertainty Punishes Stocks 📉

The indexes continued their downward trend and took a couple new sectors with them. As the decline accelerates we are seeing it broaden out. Most noticeable this week was finance. While banks earnings were not great the amount of the sell off was exacerbated. I have not seen a drop in Goldman Sacs like that probably since the 2008 financial crisis. Yes in the Pandemic it dropped but no one day drop on record like we saw this week. Prices dictates everything. Price pays. That is why I am myopic and focused only on price and its movements. Everything else is noise. Today we found out the reason while financials were coming in. Later in the day it was confirmed by CNBC. Earlier Bloomberg consensus showed 1st 2.9% annualized growth estimate down from 4.5% in November 2021. In eight weeks we sliced 1.6% off of GDP consensus. Here is what that actually means. We need 1-1.5% GDP to stay stagnant in a regular economic cycle. In an inflationary cycle we actually need higher or we are losing ground. Rule of thumb on S&P500 earnings is as follows” For every 1% of GDP OVER the first 1% is estimated to be 7% EPS earnings growth for stocks in the SPY. For example at 4.5% GDP minus 1% gives us 3.5%GDP x 7 = 24.5% earnings growth. Now we have 2.9% GDP estimate minus 1% gives us 1.9% X 7 = 13%. We cut SPY companies growth estimates in half. What does this mean? While we can always adjust up or down over time the issue is the growth in the market we thought was there is not there. Its not possible to raise rates 4 or more times in the current environment. Financials that had baked in earnings rises like banks will continue to sell down. Most companies will see lower earnings projections from analysts. The PE of the market will contract to meet the new level. While some of this was leaked obviously. The real rebalancing has not begun. Usually I focus on technical analysis but we are getting to a point in the cycle where we need to understand what is going on under the hood of the market. This is one of those times. Now a bad jobs report tomorrow will not be viewed as a possible good news for rates not rising. Instead it will be confirmation of the adjusted GDP decline. Until this settles down I continue to focus on two sectors. Energy and Casino stocks that our highly leveraged to Macau. I have been consistently shorting tech and vaccine names against those positions and the hedge has work quite well. Watch the video below. It give over 5 stock ideas for tomorrow and explains the disparity we are seeing in the Private Equity tech sector and what the means for new issues and SPACS. Let’s get to it!

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