The Market Can Still Climb This Wall Of Worry - But Not Yet

Deep Value Investing11.91K FollowersFollow5ShareSavePlay(13min)CommentsSummaryI strongly believe this is a correction, not the start of a bear market.That said, I take a devil’s advocate approach in this piece and focus on the main brick in the wall of worry: the durability of U.S. earnings growth.Current earnings expectations may appear stretched if broad AI-driven profit growth remains limited. To be clear, I (strongly) believe the recent tech layoffs are not driven by increased AI adoption.Underlying growth was already cooling before the oil shock, with softer Q4 GDP revisions, weaker private domestic demand, slowing real PCE, and a modest rise in unemployment.That said, I expect Fed Chair nominee Kevin Warsh to save the day. I expect 3 rate cuts this year to tackle the affordability problem, which will likely increase consumer spending. I also expect a reopening of the Straight of Hormuz in 2-3 weeks. Klaus Vedfelt/DigitalVision via Getty Images Trying to predict President Trump's next step in the war and trade based on that makes no sense to me. That said, the recent headlines have not been particularly encouraging for the reopening of the Strait of Hormuz. Some sources This article was written byDeep Value Investing11.91K FollowersFollowSmall deep value individual investor, with a modest private investment portfolio, split approx. 50%-50% between shares and call options. I have a B.Sc. in aeronautical engineering and over 6 years of experience as an engineering consultant in the aerospace sector. The latter statement is not relevant in any way whatsoever to my investment style, but I thought to add it for self-indulgent purposes. I have a contrarian investment style, highly risky, and often dealing with illiquid options. How illiquid? Well, you can land a Jumbo on the spread and still have clearance for take-off. From time to time, I buy shares, mostly to not be categorized as a degen by my fellow investor friends, therefore the 50%-50% allocation. My timeframe tends to be between 3-24 months.I like stocks that have experienced a recent sell-off due to non-recurrent events, particularly when insiders are buying shares at the new lower price. This is how I often screen through thousands of stocks, mainly in the US, although I may own shares in banana republics. I use fundamental analysis to check the health of companies that pass through my screening process, their leverage, and then compare their financial ratios with the sector, and industry median and average. I also do professional background checks of each insider who purchased shares after the recent sell-off. I use technical analysis to optimize the entry and exit points of my positions. I mainly use multicolor lines for support and resistance levels on weekly charts. From time to time I draw trend lines, taken for granted, in multicolor patterns. Note: I tried to keep my introduction as real, and authentic as possible. I dislike empty suits, high-level BS, deep-level BS, unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority.Thanks for reading my introduction!Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.