8/7/2023 0 Comments Brian regan pop tart![]() 75% of companies that have missed earnings expectations have gone on to underperform the market by -6.7% on average while 70% of the companies that have beaten have outperformed the market by +3.7% over the subsequent 3 trading days. Missing’s Mattered: The Macro has been driving the fundamentals but accurately forecasting those fundamentals has mattered again as we’ve seen sector variance increase and stock picking has re-emerged as an alpha driver. ![]() A topline recession with broad margin contraction is not a fundamental factor cocktail supportive of resurgent capex and gangbuster hiring. Again, the weakness is not just confined to the energy/commodity space – across Consumer Discretionary, Staples and Financials less than 46% of companies have beaten revenue estimates. Indeed, despite 9-months of progressive deflation in consensus estimates, a full 0% (as in “zero”) of Materials and Utilities companies have managed to best sales expectations thus far in 3Q. Beat/Miss: Only 43% of companies have beaten topline estimates while 75% (in-line with recent qtr averages) have beaten on EPS.Granted, the weakness is once again centered on the energy and the industrials complex but those sectors don’t operate in a vacuum and that softness has begun to creep in across the Financials, Staples & Tech sectors as well. Sales/EPS: In the aggregate, Sales growth is running -3.08% while Earnings growth is tracking at -3.31%.Let’s take a quick look below the flaky, frosted surface of earnings management to the thin layer of toasted growth at the center:ģQ Earnings Scorecard: With ~40% of SPX constituent companies having reported earnings for 3Q, the growth data remains dismal – particularly for a private sector economy purportedly still flirting with a multi-year march higher in policy rates. Keith has provided some high level earnings season updates the last couple weeks. With global inflation expectations priced in dollars and central planning centricity defining markets in the post-crisis period, that QE-Currency connection has only played out “like infinity times” (my 5-year olds new favorite line) over the last 6 years. Pop-Tart macro strategy alpha fully-baked in 3 seconds. ![]() When Draghi or Kurodo have the QE ball => Euro/Yen Go Down => the Dollar Goes Up => things priced in those dollars go down => Inflation expectations and OUS growth expectations flag => the market prices in those expectations and bonds get bid (again). Rotate the QE (Euro/Yen ↓ ) => $USD ↑ => Reflation ↓ => Growth/Inflation Expectations ↓ => Bonds ↑ In complexity, proper Pop-Tart preparation rivals what has been perhaps the most profitable macro strategy of the last half-decade. The Pop-Tart bit isn't mine but it's great (you can watch it HERE, it’s worth your 3 minutes). There are actual directions for how to eat a Pop-Tart.Īpparently we’ve devolved to the point that “remove pastry from pouch” needs to be an actual instruction.Īnd yes, it says microwave on high for 3 seconds … As in "three" seconds. "I would love to be in the room watching someone who needs to consult these directions." ![]()
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