The Fed and Small Business Optimism: Best of Kass
Jul 14, 2013 | 12:34 PM EDT
On this score, watch the potentially nascent rise in unit labor costs (payrolls), as productivity gains seem behind the sector. As well, the recent U.S. dollar strength and still-modest top-line growth exposes profit margins, which are at multidecade highs and are the Achilles' heel to (too high) second-half corporate profit growth expectations. With basically flat sales growth, it is hard to see business loosen its purse strings going forward. The volatility seen recently in the fixed-income markets when combined with the aforementioned challenging earnings outlook could limit market upside. My view is that the S&P 500 has 50 points to the upside and more than 100 points to the downside, an unfavoraborable reward vs risk. At the time of original publication, Kass was short SPY.
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