DON'T WAIT FOR FED: Fed raising rates 48% of periods since 1954 and equities often turn 6M before last "hike"

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BIG PICTURE: "Buy the dip" regime back in play, as "fundamental capitulation" was June 2022

In our conversations with investors over the past week, many fundamental investors see the current rise in equities since late-June as a counter-trend "dead cat" bounce from an oversold condition. That is, investors concerned about earnings risk (and it is a "risk" in name only currently) believe stocks have downside if the US is in recession.

  • Without getting too technical, here is a simple question
  • Will investors still think the US is in a recession if 3Q GDP accelerates to a positive figure?
  • There are 3 known tailwinds for supporting 3Q GDP to be far stronger than 2Q
  • Gasoline is down substantially and that is known to be additive to consumer spending
  • 2Q inventory correction is over, which subtracted -2.0pp of GDP
  • Supply chain constraints are easing, leading to "met demand"

Think about it. Is there going to be a debate about a recession if GDP growth is positive in 3Q? I am not an economist but the Atlanta Fed GDPnow forecast is tracking to a positive 3Q of +1.4% vs -0.9% in 2Q2022.

The panic in June was a fundamental capitulation, which we believe is more important than a "market bottom"

But a key overlay for any investor at this time is wh...
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