I’m not ready to start buying yet, still too many wildcard catalysts out there, are you?

Based on what I’m seeing we are just getting started.

For starters we still have:

1) Corporate earnings going negative (Q2 and Q3 1 and 2 year comps are gnarly)

2) Tight monetary conditions causing more issues in credit markets

3) which both lead to layoffs

Layoffs matter to consumption which drives the US economy. So how’s the consumer doing now, pre-layoffs?

Not good

– consumer credit has already grown at the fastest rate in history

– consumer savings is coming off of all time lows

IMO looking at the setup, consumption slowing dramatically in the next few quarters is a foregone conclusion. That feeds back into the corporate picture and will lead to more layoffs.

Demand slowing will slow inflation, giving the Fed room to cut. However, even after the Fed’s first cut, historically we still have a few quarters before the S&P bottom is in.

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The thing is if you ride a stock 50% down, you need to be up 100% from there to break even. Up 20% YTD after last year’s blood bath is still losing big.

In public markets, I’d rather wait until I see earnings bottom and start to accelerate rather than risk catching falling knives. Perfectly comfortable missing the first 20%

Warren Buffet’s first rule – don’t lose

There are other places to put money than US stocks that aren’t as exposed to the cycle dynamics I mentioned in the meantime.

Some ideas I’m long:

– Defensives: gold, long duration treasuries (now that we are near the end of the rate cycle), and looking to get longer defensive stocks (utilities, defense)

– China reacceleration