Jones and Cohen Say Markets will End the Year Higher

But, but, but, the MACRO says different!

I’ve become a little bit confused about the directions of markets, and the overall global economy. Much of this is to do with a handful of investors that I have followed since the beginning of my career in the financial industry back in 1999.

Paul Tudor Jones, and Steve Cohen have both recently shared their thoughts about where the market is headed by year end. Both are bullish specifically on the development of Artificial Intelligence. Yet the research that I have done and one of the research firms that I follow still strongly suggest that a recession will come.

After reading an article on Bloomberg.com referencing Steve Cohen saying that he thinks the recession talk is overblown. By year end markets will be up and most will miss out,  specifically in AI.  This got me thinking about what he is really saying. 

When I look at the consumer, I come away with a couple things. What drove consumer consumed products and services was the expansion of credit during the pandemic. That would be between 2020 and 2022 with the influx of helicopter checks. When the US consumer quit getting checks in the mail, consumer spending started to slowly decline. In the first quarter of 2023 we have seen mass layoffs in the tech industry. Upwards of 350,000 people. Most get severance packages that will run out in the next 60 to 90 days, which will eventually reflect on the unemployment numbers.

The retail sector is taking a beating and most likely will continue as we see the consumer cutting back on their spending and only buying necessities versus their spending habits prior to February 2023. Both Home Depot and Target have guided downward for the coming quarter. As banks continue to feel pressure from deposits exiting towards money market accounts, and better yields, pressure on their Hold on Maturity assets and declining lending business due to concerns about the consumer, banks/financial industry, are under enormous amounts of downside pressure. Evidence of this is Charles Schwab seeking $2.5 billion in funding.

So where is this rally in the stock market going to come from that Paul Tudor Jones and Steve Cohen both talk about? I believe it is in a very select few sectors. Specifically companies that carry an enormous amount of market cap that could catapult the S&P 500 and NASDAQ higher by year's end.

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