JD DURKIN: All right, good morning subscribers, one and all. Chris Versace and I are back now of course, as we are every Monday, to get ready for a busy week that will be ahead of earnings. But before we do that, of course we always like to begin with a quick rewind of the week that was.
Chris, welcome. Nice to have you. I hope you had a nice weekend.
CHRIS VERSACE: I had a great weekend. I hope you did too.
JD DURKIN: Thank you very much. In an alert Friday, you stressed caution as bearish market conditions persist. That was a message that Helene Meisler and I spoke about at length during Friday's session. How are you feeling as we begin a fresh week? What's on your radar?
CHRIS VERSACE: Wow, I mean, it is a big week for the markets. We've got over 1,000 companies reporting. You know, about 180 S&P 500 companies alone. And as I touched on in Friday's rundown, by the end of this week, roughly half of the S&P 500 will have reported their respective March quarter results. So we're going to have a really good sense as to what 2023 earnings expectations are looking like.
Remember, as late as last September, the expectations for 2023 were up about 8% year-over-year. Coming into this week JD, it's up less than 1%. So this week is going to be a real big inflection point for are they poised to be flattish for 2023 or might we see those expectations move lower, indicating a year-over-year decline in earnings? And I bring this up because it's important.
When we look at where the market is trading, north of 18 times forward expectations versus where it was the last time the Fed funds rate was around 5% or so, which is where we're likely to be as we enter early May, the market multiple was peaking at around 17 times. So when we look at that fundamental analysis, we look at what Helene was saying, what Bob Lang has out in today's S&P 500 chart, we could be hitting kind of a stall area for the market. So we want to be careful and pick our spots.
JD DURKIN: On the subject of being a bit cautious here, you did trim a few names. Talk to me about some of your thinking and calculus that went in to that decision-making. Is it just being a bit cautious? Is it part of a bigger strategy? What should members know?
CHRIS VERSACE: So there's really two parts to it. As I just alluded to, we have a very big week. We also have some other data out on the inflation front that could really see the dueling narratives in the marketplace between rate cuts, no rate cuts really kind of bubble back up. So heading into that, we wanted to take a more cautious position with the portfolio. Hence, those trimmings.
And remember, some of those trimmings we saw some nice price movement and we always want to kind of ring directly-- excuse me, ring the register. Or as I like to say, convert and realize some of those profits for the portfolio and for members. So that was one aspect of it. But remember too, JD, you and I had a conversation a couple of weeks back where I said, look, portfolios are now over 30 positions.
At some point we're going to have to start to make some moves so we can make some room for newer positions that give us great opportunities as we look out, again, the next three, six, nine, 12, 18, 24 months. So we're starting to make those moves, again, trying to make that room, build up that cash to do so.
JD DURKIN: All right, time now for my favorite question of the week. If you could go back in time one week ago to last Monday morning, what would you have done differently?
CHRIS VERSACE: You know, it's a great question. And it's one that if I were to go back to last Monday starting off the week, I probably would have whispered into my ear and said, hey, you are going to be taking some chips off the table. Let's communicate that a little more clearly with members so they don't think you're doing anything drastic. I think we did a good job communicating the why behind those moves.
And we just touched on it again, but we could always strive to be a little more clear with members, really explaining the thought process even more so. So from time to time, I go back, I revisit what I wrote, how I wrote it, really thinking about it from the member perspective. And there are times I think where I could probably be a little more clear. So that's probably what I would have done.
JD DURKIN: All right, looking ahead to the rest of this week, we've got earnings from Alphabet, from Amazon, from Microsoft. What is your read on the club's tech positions as we head into those respective must-watch reports?
CHRIS VERSACE: Yeah, so the NASDAQ is up extremely strong year-to-date. And there's a lot of questions over what the next move is going to be for big tech. We also have some other big tech names reporting, including Meta Platforms as well. So I'll kind of lump all my comments into that.
We've taken a very cautious approach. We've let these stocks melt up. We've trimmed a little bit of Microsoft where it looks a little frothy. We say that because the end markets are PC still very weak, cloud good. But a lot of the run-up has been fueled around these AI related headlines. And at some point like we've seen in the past with Metaverse and other things, gravity starts to set back in. And we could see that in the next couple of days.
We're going to be wanting to assess the core businesses for each of these companies that we have. Of course, with Google, that's going to be how are they doing on the advertising front? As companies continue to cut back, are they continuing to gain share? That's our thinking, but we're looking for confirmation before we make our next moves with any of these positions and potentially revisit some ratings and price targets.
JD DURKIN: Chris, is there anything you think we might hear this week that could challenge the revival that we've had with tech so far in 2023?
CHRIS VERSACE: So like I said, tech has been a barn burner year-to-date. But when we take a look back at some of the comments of late from Micron, even last week from Taiwan Semiconductor, the much expected bottoming out in the tech sector that was supposed to be the second quarter, it looks like it's getting pushed out a little bit. So that timing is, again, not quite as precise as some folks were looking for previously. We tend to see this. It does mean that we could see some give back in the tech sector. And if we do see that, we've built our shopping list. We've shared it with members both here in Daily Rundowns, as well as in Friday's AAP Rundown as well.
So we could be looking to take advantage of this depending on what we see this week and into next week. Because, again, we have another I think it's like 1,500 companies reporting next week. So the next two weeks will be kind of important for the market, important for tech.
JD DURKIN: I just want to get your sense on a few other names you may or may not be closely following. We'll hear from UPS, United Waterworks, PepsiCo, Verizon, just to name a few. What other top names are on your radar and therefore, perhaps, should be on the radar of our members, Chris Versace?
CHRIS VERSACE: So that's like asking a parent what their favorite child is. The reality is I'll be paying attention to all of those. But some of my areas of greater focus will be on those positions like UPS, like PepsiCo that are really encroaching on our price target. So what I'll be looking to see is, is there more gas left in the tank for these particular positions that we might have thought previously?
In other words, is there more upside to our price target? If so, how do we make those adjustments, what does that mean for our ratings? So those are the things that I think for those handful of positions that I'll be really focused on.
JD DURKIN: Any earnings outside the portfolio I wonder, Chris, that you're also likely to be tracking?
CHRIS VERSACE: Well, when there's over 1,000 reports in one week and 180 S&P 500 companies, you can bet that there's going to be at least several that we're watching. So some of them, CME Group as an indication of what we're likely to hear from SeaBoat. General Motors is going to report. We're going to want to really dissect that report ahead of Ford's earnings next week. We've also got Caterpillar and what they're likely to say about infrastructure spending. That will weave into our thoughts, hopefully updating on a positive stance with United Rentals and Vulcan Materials. And then we have Visa, which reports ahead of Micro-- Mastercard. Excuse me. So we'll be focused in on that report as well.
JD DURKIN: And of course on the data front, as if all of that weren't enough with regards to earnings, there is PCE data. What are you following? What should we know?
CHRIS VERSACE: So this is the Fed's-- excuse me-- preferred inflation metric. So we're going to want to see what it has to say about that particular data point, right? And the reason we're going to focus in on this is that dueling narrative that I mentioned earlier, how many rate cuts is the Fed going to do in the back half of 2023? A few weeks ago, the market was thinking upwards of four. That's collapsed down now to around two rate cuts.
But we have to remember what the Fed has said in their last policy statement and what the recent parade of, as I like to say Fed heads have been saying, which is we need to do more. Inflation is persistent. The path to-- the path ahead is going to be slow. So we put all that in, if we see the March PCE index, particularly the core PCE index remain relatively unchanged, we're likely to see those expectations that the market has for the back half of the year for interest rates change.
And remember, JD, the precedent here is that the core CPI was virtually unchanged during the March quarter. If we see a repeat of that in the PCE data, I think the market's going to have a little bit of indigestion on Friday.
JD DURKIN: You've always done a great job to remind members of the importance there of core CPI specifically from a few weeks ago. Chris Versace, I hope you're caffeinated for the week ahead. It's going to be a busy one. Thank you as always.
CHRIS VERSACE: I will be double decaffeinated.
JD DURKIN: All right, the great Chris Versace. Good. Right on. Rightfully so. To bring our members everything they need to know, Chris Versace, thank you very much. And that, folks, is going to do it today for us here at The Street. Chris, we'll be back tomorrow for a deeper dive into some of the earnings and top names you need to know. We'll see you then. Have a great day.