While there may be a plethora of geopolitical reasons to be 'cautious' of getting over your skis in US equities, there are a number of more quantifiable reasons for not buying-the-f##king-dip here. Between the sustainability of US earnings and the sell-in-May mantra, we highlight five foods-for-thought before you push all-in this morning. Of course the only bullish reason left is Central-Bank-driven and remains the elephant in the room but as we get closer and closer to the election, the Fed will be increasingly snookered and require a market plunge of more than 1.5% to step in and save the civilized world with S&P 500 1285 as a target for Fed action based on last Summer's excitement [3].
The S&P 500 sold off quite handsomely the last two Summers - notably in the lead-up to post-Fed action...
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While macro data continues to deteriorate rapidly...
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And while Q1 earnings surprised from notably marked down expectations - the sad truth is that this supposed strength is absolutely ignored by the analyst community when it comes to forward guidance which has not changed at all...
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and if you are told that stocks are cheap - they are not - with non-cyclicals at a post-crash peak in forward P/Es and Cyclicals in the middle of their range, it is clear that stocks are far from relatively attractive...
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and finally, relative multiples have contracted for economically sensitive stocks throughout the recovery - despite supposedly superior company results - suggesting a general lack of belief in the sustainability of any economic growth story...
[8]