Recent data is sparking concerns about the fragility of the stock market, with warnings that we might be on the cusp of a significant economic shift. Bank of America reveals that one out of every three companies in the Russell 2000 index is currently unprofitable, signaling potential vulnerabilities in the market.
“If one-third of small public companies struggle to turn a profit during favorable economic conditions, the question arises: how will they weather the storm in the next recession?” asks one analyst. The comparison to historical tipping points, such as the launch of the first web browser, adds weight to the argument that we might be at a crucial juncture in the economic landscape.
Key indicators, including the Shiller PE ratio at 34 (compared to 17 in 1989), the longest winning streak for the S&P 500 since 1989, and more than a third of the S&P 500 being concentrated in just 10 stocks for the first time in over four decades, are raising red flags.
SocGen’s Manish Kabra highlights the significant outperformance of the NDX over S&P 500 EPS, suggesting a potential tipping point in the U.S. equities EPS cycle. The extra yield required for holding investment-grade bonds over U.S. Treasuries is nearing its lowest level since the Global Financial Crisis, adding to the concerns.
Amidst these warning signs, gold emerges as a counterpoint. Seen as the “Anti-Bubble,” gold is positioned as monetary insurance and a stable anchor in the face of potential financial turbulence. The unique role of gold as a hedge against economic uncertainties is gaining attention as investors seek stability in an increasingly uncertain market.
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One out of every three companies in the Russell 2000 index is unprofitable –BofA pic.twitter.com/K2BxHJWXty
— Gunjan Banerji (@GunjanJS) February 27, 2024
If one third of small public companies are not able to make money during good times, how are they supposed to survive next recession, whenever it may come? pic.twitter.com/JbdgVnqFIY
— Michael A. Arouet (@MichaelAArouet) February 28, 2024
"If you consider the ChatGPT tipping point as equivalent to the launch of the first web browser, things are basically on track and following the same script as investors attempt to factor in the new economic paradigm that may come."@bespokeinvest via @Callum_Thomas pic.twitter.com/osT2dlXxLF
— Daily Chartbook (@dailychartbook) February 27, 2024
Equity Sentiment pic.twitter.com/KoQrEn1Hq8
— Win Smart, CFA (@WinfieldSmart) February 28, 2024
"NDX is well ahead of S&P 500 EPS, which also suggests that the US equities EPS cycle is at a 'tipping point'."
– SocGen Manish Kabra pic.twitter.com/awVa61VYlO
— Daily Chartbook (@dailychartbook) February 27, 2024
Schiller PE in 1989 17 at the top. Now we are at 34. t.co/kWcYhyOXl3
— Mat Roiss (@InvestRoiss) February 27, 2024
This is insanity!🤯
They better rename S&P 500 ➠ "S&P 10"🤦♂️ t.co/1Xa6CoyvD4
— Harrison | Trader & Investor (@harrisonfromnyc) February 27, 2024
The extra yield investors require to hold investment grade bonds over U.S. Treasuries is approaching its lowest level since the GFC pic.twitter.com/OEW4WlBW34
— Win Smart, CFA (@WinfieldSmart) February 28, 2024
Gold Is the Anti-Bubble!
When you realize that this metal IS NOT a speculative asset but is instead, monetary insurance and an anchor in the next financial debt/paper/digital storm, you don’t pressure the ancient hunk of value to be what it is not.t.co/Un64CAzGot
— Peter Spina ⚒ GoldSeek | SilverSeek (@goldseek) February 28, 2024