Goldman On The Most Important Market Technical; "Stock Buybacks Return Full Blast In 1 Week"

By Tony Pasquariello, Goldman head of hedge fund sales

1. US equities have been rangebound since mid-December. That said, S&P is just one good day away from taking out the highs, and NDX is already there. I’ve mentioned a handful of times this underlying tension in my core framework: a friendly macro backdrop on one side, demanding valuation and technicals on the other. That comes with recognition that investor tensions most always exist -- one-sided bets come along maybe once or twice in a generation -- and for stocks, they usually resolve ... to the upside.  I say that to remind myself of this fact: US equities generate really healthy returns in about four of every five years (data available). Here’s the point: I would bet that we will chop around a lot this year, and I’m sure there will be some ugly turns along the way, but I also don’t want to lose sight of the natural arc of the market.

2. There has been no revision to the in-house view that March will bring the first cut. Now, Fedspeak this week -- notably from Mr. Waller -- threw some cold water on the profile of the 2024 cuts, which suggests the bar to a March cut (and an every-meeting-pace in H1’24) may be higher than suggested in December.  Bigger picture, while I can tell myself a few stories about the challenges of “the last mile,” the fact is this: the annualized 6-month average of core PCE is now below 2%, and it was just one month ago that Chair Powell said his committee would want to cut “well before” we reach the 2% objective. So, the onus is now squarely on the data, and the next two CPI (and PCE) reports loom large.