Daily Brief For April 25, 2023

The thick of earnings season dawns.


Keeping it brief today, as well. PS: Almost ready to go live with that detailed report!

Half of the S&P 500 (INDEX: SPX) is scheduled to report earnings in the next weeks, and this will help investors further validate the index’s recent strength and tameness driven in part by “liquidity turning higher,” early solid earnings reports, the resolution of the bank turmoil, and expectations of “swift cuts by the Fed” later this year.

Aside from the debt ceiling issue, if new data confirm a growing consensus that the economy could slow and stay slow for a while, markets may endure some upset.

Graphic: Retrieved from Bloomberg via Tier1Alpha. Default probabilities are low. With a CDS of 130 and assuming a 40% recovery, the implied probability of default is 2.17% or so (130/0.6).

Anyways, the most objective thing to do is to hedge upset and the lagging effects of policy as covered in the previous two letters more deeply. Lock in protection against inflation while allocating remaining buying power to plays on equity strength that you may monetize and roll into bets on weakness later on should it be realized.


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