The U.S. economy appears to be like good sturdy and must feed into corporate profits, says Horizon’s Hill

Uh thank you both for joining us you know the journal has an interesting piece uh just about how we're looking at this sort of very strange economy and even maybe stranger Market where you've got you know profits holding up of sorts uh against a sort of fascinating Revenue picture and.

Yet the markets have continued to go up and people I think are sort of thinking what's what's going on here I'm sorry I should say not profitable margin compression at a time when when the markets are going up so what do you think is happening here Mimi well I think that there is a bit of a tug of war here.

Um we see the earnings as not so great as you pointed out in uh margins compression is continuing on the other side I think some of what was giving markets the optimistic view into the start of the year was um the China reopening story and also um a potential to maybe have a soft Landing I think got some folks geared up.

Zach you know Andrew I see it a little bit differently I mean you know I think actually earnings have been pretty good by and large and when you talk about you know that story in the journal which I haven't read but I've seen similar things you know talking to that theme and I think that's just part and parcel.

For the situation that we have today where you know volatility is elevated in the real economy because we have high infl ation so there's a difference between nominal and real growth you know we saw that last year with the GDP print and we're seeing it again this year and so you know I think broadly speaking we're kind of looking through some of.

This in the short term and just really as we assess the health of the U.S economy to us it looks pretty strong so we think that's going to feed through into corporate profits whether it's this quarter or the next one is a little bit less relevant than the kind of the bigger picture on our view um if you're right what are you doing.

About it well if we're right I think that means that you know equities have a little bit of a room to run here um and so you know we have been increasing our risk exposure across our portfolios in the last couple of months um but that does kind of set up a situation potentially in the you know in.

The summer months or maybe in the fall because you look at the fed's projections and you look at the way that they're thinking about things they're really relying on a slowing economy to do a lot of their work for them and so we could be in a position where you know we don't think the FED is behind the curve right now but if they you know.

Kind of guide things a little bit slower in the next few months we could be in a situation where we don't have to we're not talking about you know five and a quarter terminal rates we're talking about maybe six percent rates and certainly at 18 and a half times forward earnings the s p is now priced for that Mimi.

Well we came into the year squarely neutral so we're in a we're in a pretty good position right here we've been enjoying the upside that we've seen thus far and we're getting a bit more cautious on Equity evaluations right here but having said that we're looking for a broad range trade in the s p over the course of the Year call it 36 50 to.

4300 and on the fixed income side we're really enjoying some higher yields and picking some points like Emerging Market debt is uh is yielding close to seven percent front end front end tips are uh are they've just moved quite a bit we've been long them for some time but we expect them to continue to provide uh protection and just overall we're.

Looking for a 10-year yield range of call it three and a half to four and a quarter percent and we're happy to earn the yield on the fixed income side

Sharing is caring!