Historically, Rate Shocks Have Hit SP500 Earnings With a 1.5 Year Lag | Will This Time Be Different?

This week was FOMC week, and the Federal Reserve announced a 0.75 basis point rate hike in line with market expectations. We will be posting a tactical update following the weekly close that will be covering:

  • September Fed meeting conclusions and how the financial markets have interpreted what was said.
  • Inter-market dynamics and how they are impacting the broad market and specific sectors.
  • Internal market dynamics, including market breadth, and how top components are leading or lagging.
  • Relative sector performance and where opportunities currently stand.
  • Recent key technical developments in the equity markets.
  • A quick review of some macro dynamics currently at play.

Here is today’s Youtube video:

 

 

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6 comments

  1. (0) 0
    CRYPTOMATIC says:

    Is the team suggesting the effect on earnings is likely to be 3Y from start of tightening and 1.5Y from end of tightening per the 2004-8 example shown in the video or effect lags 1.5Y from start? Thanks as always

  2. (0) 0
    Samonita Kayden says:

    Since mid-September, both US02Y and US10Y have further risen drastically, what were actually the major driving factors, other than the earlier unexpectedly hot core inflation reading, for this short-term move? What the FED said to the press a few days seemed nothing particularly surprising to the upside for yields.

    1. (0) 0
      Alexander Hung says:

      The important figures here are:
      2022: Fed Funds Rate is projected to hit 4.4% in 2022 up from 3.5% in June.
      2023: Fed Funds Rate is projected to hit 4.6% in 2023 up from 3.8% in June.
      2022: GDP growth is set to grow at only 0.2% down from 1.7% in June.
      2023: GDP growth is set to grow at only 1.2% down from 1.7% in June.
      Inflation projections have been raised across the board.
      Inflation is not set to reach its target until 2025.

  3. (0) 0
    Wenjie Hu says:

    Great analysis on delayed rate effect on earning. What about strong dollar? S&P companies have 40% earnings from overseas. Strong dollar impact on earning should be immediate. Have you looked into this?

  4. (0) 0
    Andre Froncioni says:

    Can you please share the details of your tightening-eps causality? What causality tests did you perform? Did you try negative lags? Do you have phase plots of the lagged variables?

  5. (0) 0
    Maxrothira says:

    Thank you for posting the youtube video.