Prediction Held up
Timmer: Equity rally driven by P/E expansion is ending
“If that earnings pivot comes and that earnings recovery happens, then the market can continue to advance on the basis of rising earnings, but the phase where it rises purely on the P.E. Going up, that, I think, is, is now ending, and I think, you know, in the …”
Opinion
Timmer: Stock market pivoted to betting on soft landing and earnings recovery
“For the stock market, I think there has been a pivot away from the interest rate narrative towards the soft landing earnings recovery narrative and that's what the market is betting on”
Assertion Contradicted
Timmer: 2023 Corporate Earnings Estimated to Drop 3%
“Now, overall earnings are declining very, very modestly. They're scheduled estimated to be down three percent this year, which isn't very much.”
Prediction Not checkable as stated
Timmer: Bonds Will Hedge Volatility Better in a 2024 Recession
“If we do get a recession down the road sometime in 2024, Then you would think that bonds will do what they normally do, which is to protect investors from volatility, and again, last year, bonds were in the eye of the volatility storm, but now that yields are …”
Insight
Timmer: Full Fed hiking cycles typically span 5 to 6 percentage points
“So the full cycle tends to be five, six percentage points from two to three below what we would consider a neutral rate, which is generally thought of as about three and a half percent or so, to about two to three percentage points above.”
Prediction Not checkable as stated
Timmer: Dropping Inflation From 3% to 2% Will Be Harder
“I think the lifting will be a little heavier going forward because what we call the base effects, you know, that rate of change calculation where you add in the current month and you drop out the data from 12 months ago. The base effects are basically behind u…”
Insight
Timmer: Equities Typically Rally 2-3 Quarters Ahead of Earnings Bottom
“What we see typically in a market cycle is you have a cyclical bottom, and it looks like last October may have been exactly that, and then you have a recovery, an early cycle recovery based on eventually an earnings recovery, but the market discounts that. So …”
Insight
Timmer: Higher cost of capital from Fed rate hikes requires broad asset resets
“All investments are really valued as the present value of future cash flows, and that's true for bonds, it's true for stocks, and what the Fed was doing last year was raising the cost of capital, and that requires a reset for all assets, and that's exactly wha…”
Assertion Supported
Timmer: 80% of Q2 Companies Beat Earnings Estimates by 7%
“Second quarter earnings season just wrapped up. 80% beating estimates by an average of seven percentage points.”
Assertion Supported
Timmer: TIPS Market Implies 2.25% to 2.5% Future Inflation
“If you subtract the real yield of tips from the nominal yield of regular treasuries, you get an implied inflation rate, and that inflation rate is around two and a quarter, two and a half percent which is the market's way of saying that the Fed will be success…”
Assertion Supported
Timmer: CPI Dropped From 9% to 3% While Core Remains at 4%
“And remember, the CPI has already gone from nine percent last year, June, To now three percent. So we have seen significant improvements, even though the core measures that the Fed is most interested in is still at four percent.”
Assertion Partly supported
Timmer: 10-Year Real Yields Rose From -2% to +2%
“And two years ago, that real yield was minus two. Today, it's plus two.”
Assertion Supported
Timmer: 2022–2023 Fed rate hikes are among the fastest in history
“And a year and a half ago, the Fed was at zero, zero to a quarter. So it is one of the fastest, most aggressive rate hiking cycles that we've ever seen.”
Assertion Supported
Timmer: S&P 500 P/E Multiple Rose From 15 to 20
“The PE ratio for the S&P has gone from 15 to 20. That's a pretty big move. That's an almost 30% move in the market, and so now this soft landing has to continue to materialize, or the markets might be sort of on the wrong foot.”
Assertion Supported
Timmer: US yield curve has been inverted for almost a year
“We know the yield curve is very inverted, and it has been inverted for a long time, so short-term rates are well above long-term rates, and they've been that way for almost a year.”
