Editor’s Note: Gina Martin Adams, Chief Equity Strategist at Bloomberg Intelligence, delivered one of the most popular sessions at the NIRI 2023 Senior Roundtable Annual Meeting, speaking on “Equities Amid Inflation Shocks, Recession Scares and Policy Pandemonium.” She guided attendees through the outlook for corporate earnings trends and offered her views on
the U.S. equity market given tectonic shifts taking place in inflation, economic growth, and fiscal and monetary policy direction. Martin Adams presented models for assessing fair market value, the eco- nomic regime, and sector and factor allocation. She also dove into corporate transcripts and earnings season details to help decipher the tea leaves of the equity market. Tis type of in-depth analysis is one of the ways the Senior Roundtable provides unique value to its members. Given recent shifts in the equity market, IR Update asked Martin Adams to update some of her analysis. Tis article reflects her views as of late April 2024.
A
s I said in the introduction to my session at the NIRI 2023 Senior Roundtable Annual Meeting, I was an economist before I became a strategist, so forgive me for all the charts I am sharing with
you. But they do tell us a lot about what’s going on in the economy. Tese models will give you a very different perspective than what you would get from the popular press. At Bloomberg, we have done a substantial amount
of quantitative research that identified what is really meaningful for addressing stock prices. Tere are more than 250 economic indicators representing the U.S. economy; they are issued quarterly and it is way too much information and generates a lot of noise. I will focus on our primary indicators in this
analysis. Technical equity market signals have weakened
at the start of the second quarter of 2024, hinting that a break in the bull market may be likely in the near term, but the longer-term uptrend should stay intact, thanks to strengthening fundamental cues. We still see inflation as the biggest near-term risk to
stocks, as growth conditions remain relatively stable and expectations for growth are low. Tus, repricing in the bond market affiliated with inflation pressure may be the primary headwind for stocks to keep facing down.
Stocks Checklist Leans Optimistic, Despite Turn in Technicals Our latest market-health checklist summarizes the
state of 17 timely indicators in three categories—tech- nicals, earnings trends and bonds/macroeconomic signals—and shows no red flags at this time. Still, nearly as many components offer mixed (yellow) signals as all-clear (green) ones. (See FIGURE 1.)
FIGURE 1: Stock Market Health Indicators
IR UPDAT E ■ SPRING 2 0 24 11
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