Research Summary

The article provides a detailed analysis of the current market conditions and trends. The week saw the worst market drawdown since the SVB banking crisis, with significant falls in the S&P 500, NASDAQ, and Russell 2000. The report highlights the potential issue of the $1.4T commercial real estate debt maturity wall in the latter half of 2023 and 2024, with banks owning half of this debt. It also discusses the ongoing AI mania, cautioning that the hype may have exceeded near-term capabilities.

Actionable Insights

  • Monitor Real Estate Debt: The $1.4T commercial real estate debt maturity wall is likely to become an issue in the back half of 2023 and through 2024. Banks own half of this debt, and regional banks own 75% of the bank’s share of it.
  • Assess AI Stocks: AI mania continues, but the hype may have exceeded the near-term capabilities. The resulting multiple expansion is not warranted unless we start to see meaningful margin expansion in Q2 earnings.
  • Stay Informed on Market Conditions: The markets are feeling quite squeeze happy of late. However, this episodic squeezing of highly shorted stocks may not be sustainable, having recently reached an extreme.
  • Consider Bond Investments: For the first time ever, the yield on cash, bonds, and equities is the same. US investors should probably buy bonds because in risk-adjusted terms they give more.

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