We hit 3636 on the 17th. Now we are at 3964. We need to go down 8.7%. That's pretty big drop and I don't see any big news coming.
Multiples have come down, the ukraine war has stagnated, I don't think china will continue with lockdowns, I don't think the dollar will keep rising and expectations have been massively lowered.
Russia has already massively reduced the gas to the eu. A likely bad result is Russia cutting off the gas completely but a lot of that has been priced in already imo and the eu countries are taking steps to protect themselves. I don't think we will see super widespread lockdowns in China. They are already trying to increase their vaccination rates and the cases have gone lower. But even with strict widespread lockdowns we see companies like Tesla not get hit that hard because employees are lockdown in the plant and continue working.
Dollar strength has hurt earnings some companies like google and microsoft have missed their earnings coz of that, some companies like Johnson and johnson have also seen their profits hit but have met earnings. I don't think we will see a ton more dollar strength because other central banks have started hiking along with the fed. And the market hasn't reacted very negatively to lower earnings coz of strong dollar.
Expectations have been lowering for a few months. Micron had something like 24 earnings revisions and even though it's earnings weren't great it still went up coz it beat earnings and expectations. Same with Netflix, lost 1m subs and still went up. Recently walmart also came out and lowered expectations too. Big tech giants have announced hiring freezes and companies like coinbase and shopify are laying off ppl. Companies are scrambling to lower costs and prepare for the upcoming decline in revenue. Imo the bar for next earnings will be low and companies will do okay.
Oil prices have gone down. There has been more time for supply chains to improve. The Fed will see 2 inflation reports by September. The market has priced in rate hike next year so if we get a surprise from the fed it will be most likely by next year if they decide to keep raising rates. And inflation started increasing late last year so the closer we get to years end we will be comparing now to a higher base which will mean lower inflation %
We might get an 100 basis point surprise from the Fed or apple missing earnings or some other shock and drop a bit but I don't think we will drop 9% more to reach new year lows.
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