2.12.24: Economists believe Fed is 'Overly Restrictive'

For Public Readers: Weekly Key U.S. and China brief market notes by Larry Cheung's Analyst Staff Team for our Public Email List

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Feb 12, 2024

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In our emails, we will provide the following coverage points:

Brief Overview of U.S. & China Markets
Macro Chart in Focus
U.S. & China Upcoming Economic Calendar
Chart That Caught Our Eye

U.S and China Markets Brief Snapshot 🇺🇸 🇨🇳

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S&P 500 Index: 5021.84

KWEB (Chinese Internet) ETF: $24.94

Analyst Team Note:
334 S&P 500 companies (79% of index earnings) are in. Consensus 4Q EPS (actuals + estimates) is tracking a 4% beat, with reported EPS coming in 7% above consensus.
EPS is tracking +7% YoY, accelerating from +4% in 3Q.
Reactions to beats (+150bps) have been in line with history, and misses have been punished (-400bps vs. -220bps historical avg.).
The Magnificent 7 (ex. NVDA that hasn’t reported yet) beat EPS by 7%, in line with the other 493.
Mega caps ($100B+ in market cap) also beat by the same amount, while small caps are posting the biggest beat, +10%. However, the growth rate is much stronger for the Mag. 7, +59% YoY vs. -3% for the other 493.

Macro Chart In Focus

Analyst Team Note:
A recent poll by the National Association for Business Economics (NABE) showed growing concern among economists that the Federal Reserve's monetary policy may be overly restrictive, with 21% of respondents deeming it "too restrictive," marking the highest level of concern since mid-2010.
The central bank is hinting at a cautious approach towards rate cuts, with market expectations leaning towards a potential easing in May.

Upcoming Economic Calendar

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U.S Economic Calendar (Upcoming Data Points)

China Economic Calendar (Upcoming Data Points)

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Analyst Team Note:
Recent strong spending growth has been mostly due to supply expansion rather than increases in demand.

Chart That Caught Our Eye

Analyst Team Note:
Four years post-Covid, U.S. office occupancy has plateaued at around 53% in major metropolitan areas, despite efforts to encourage a return to office work.
However, local governments appear resilient, with some analysts suggesting that cities can manage potential revenue losses from commercial real estate through careful expenditure management and reliance on other revenue streams, such as residential property and sales taxes.