Lauren Goodwin, a portfolio strategist from NY Life Investment Management, shares her bearish, defensive view on the markets. Investors are pricing in even more rate cuts next year given that we are on the last leg of the expansion cycle and the Fed has simply bought everyone some time. But once we see the corporate debt burden wake up and profit margins squeezed, things might get dangerous.
Goodwin sees term premia reaching zero or negative. She then discusses the tech giants’ earning season. The FANGs have achieved strong results and high margins despite a relative slowing in growth, but we haven’t seen them hold up in a recession environment yet. Towards the end, the discussion moves to predictions of Wall Street doom and gloom should Warren continue gaining popularity.
Why does this matter? With the increasing bearish sentiment around markets, the recent Fed cuts might do little to perpetuate the cycle. We also recently featured an in-depth piece on Why Warren Doesn’t Need Much To Beat Trump and we now see an increasing number of Wall Street warnings that the S&P would drop 25% if Warren is victorious. Her policies are considered to be anti-capitalistic, unproductive, and plain ludicrous. However, it’s worth remembering that the same cataclysm was predicted before Obama and Trump’s elections and none of it materialised.
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