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Jurrien Timmer Profile
Jurrien Timmer

@TimmerFidelity

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Dir. of Global Macro @Fidelity . Student of history, chart maker, cyclist, cook. Helping investors break thru the clutter. Views are mine.

Boston
Joined December 2014
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@TimmerFidelity
Jurrien Timmer
2 days ago
What happens to the stock market when the Fed begins to tighten, as it is about to do now? More often than not, stocks hang in there. This chart shows the S&P 500 from the start of the Fed cycle. I think we can expect ongoing positive returns, but less robust, with more wobbles.
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Jurrien Timmer
2 days ago
The market expects the Fed to return to 2% over the next few years, with liftoff starting in March. If so, it wouldn't be the gentlest pivot in Fed history, nor the harshest. This chart shows the Fed cycle as measured by the basis point increase from the point of lift-off.
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Jurrien Timmer
2 days ago
Where goest thou, S&P 500? We may see ongoing, modest price gains through 2023, but perhaps with more wobbles. This chart shows that, historically, price gains become modest once earnings growth peaks.
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Jurrien Timmer
2 days ago
We've likely seen the last of monster earnings growth rates for this cycle, but the landing looks soft. This shows past cycles indexed from the peak in earnings growth. A 9% growth rate in 2022 would be similar 2004 and 2010, which produced extended mid-cycles.
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Jurrien Timmer
3 days ago
A special 65th anniversary dinner for my parents last night. This family gathering had to be rescheduled 3 times because of the pandemic, but it is finally happening.
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Jurrien Timmer
4 days ago
Earnings growth has been robust, but history has seen better. Similarly, the expected cool-down should not break any records. This shows earnings growth for the current cycle (with estimates through 2022) in the bars, overlaid against all peaks since 1920.
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Jurrien Timmer
4 days ago
Liquidity and interest rates won't propel stocks in 2022, so if it’s all up to earnings growth, what can we expect? With Q4 earnings season getting underway, the consensus is for 9% growth in 2022. Based on historical patterns, that may well come down a few percentage points.
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Jurrien Timmer
4 days ago
Price gains should now converge to earnings growth, per this chart. If EPS growth goes from 48% to 9% and there is no multiple expansion, then it’s hard to see the S&P 500 gaining more than high single digits. But after a 116% gain since March 2020 low, who's complaining?
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Jurrien Timmer
4 days ago
Time will tell. The 2016-18 Fed cycle was a nothing-burger for two years, followed by an overreach at the end. This caused a swift 20% draw-down in the S&P 500, which then produced the dovish pivot. Remember: It’s not about how the cycle starts, it’s about how it ends. /END
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Jurrien Timmer
4 days ago
Perhaps that will change if the Fed, getting closer to 2%, decides to move the goal posts. But at this point, the Fed's hawkish pivot looks fairly benign. /3
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Jurrien Timmer
4 days ago
Even with 200 basis points of tightening priced in, if the current 7% inflation rate reverts back to 3, the terminal rate will still end up well below neutral (-1.5%). That would hardly be a restrictive monetary regime. /2
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Jurrien Timmer
4 days ago
The Fed certainly sounds hawkish these days, but the implications aren't as severe as you might think. Take a look at this chart and I'll explain. 🧵
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Jurrien Timmer
4 days ago
Up until about six months ago, price did what it usually does at inflection points: it led earnings. Thus, a 65% multiple expansion. Then earnings started catching up and the P/E multiple came back to earth. Now earnings growth is peaking as the liquidity environment is cooling.
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Jurrien Timmer
4 days ago
Fortunately, S&P 500 earnings are expected to grow 9% in 2022 and 10% in 2023, which means that, even with some P/E compression, the bull market can continue, albeit not at the pace of the past 22 months. /END
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