📑 Research Notes for 2022-01-31
This week, we look at future Fed rate hikes, Dalio's views on market volatility, the latest inflation reading, and why the discounted cash flow model is so fundamental to investment analysis.
We conduct extensive investment research and share the most interesting content that we come across every week. Here is a curated list of this week’s top observations.
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Goldman Sachs Predicts Fed Will Raise Rates Five Times This Year.
(Bloomberg)
Goldman Sachs’ economists joined Wall Street peers in forecasting the Federal Reserve will raise interest rates more aggressively than they previously expected. Economists now predict the Fed will lift its near zero benchmark by 25 basis points five times this year rather than on four occasions. That would take the benchmark to 1.25%-1.5% by the end of the year.
🔗 Source
Bridgewater Associates' Dalio on Market Selloff.
(Bloomberg)
Asian stocks and U.S. equity futures declined past Tuesday amid concerns about Federal Reserve monetary-policy tightening, geopolitical tension and breathtaking volatility on Wall Street. Bridgewater Associates founder Ray Dalio says markets are having to adjust to the prospects of the Fed's lift-off.
🔗 Source
Key Fed Inflation Gauge Rises 4.9% From a Year Ago, Fastest Since 1983.
(CNBC)
A gauge the Federal Reserve prefers to measure inflation rose 4.9% from a year ago, the biggest gain going back to September 1983, the Commerce Department reported Friday. The core personal consumption expenditures price index excluding food and energy was slightly more than the 4.8% Dow Jones estimate and ahead of the 4.7% pace in November. The monthly gain of 0.5% was in line with expectations.
🔗 Source
Investing’s First Principles: The Discounted Cash Flow Model.
(CFA Institute)
Valuation multiples can be helpful when properly applied and with an understanding of what they are proxies for. That low P/E stock may not be cheap if the firm has a huge net debt position. That high P/E stock may not be expensive if it is asset-light with a pristine net cash-rich balance sheet and tremendous prospects for free cash flow growth. But many analysts have forgotten that P/E ratios are an imperfect stand-in for the DCF model and shouldn’t be used in isolation.
🔗 Source
Last Week’s Market Performance Heatmap
(FinViz)
🔗 Source
Curated by Joseph Lu, CFA®
Joseph is the founder and managing director of Conscious Capital Advisors and has over a decade of experience as a quantitative analyst and portfolio manager.
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