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Treasury Partners’ Saperstein Expresses Bearish Outlook as Market Fundamentals Deteriorate

Richard Saperstein, the Chief Investment Officer of Treasury Partners, recently appeared on the show ‘Closing Bell’ to discuss the conflicting signals within the market and his perspective on the current situation.

Saperstein, recognized as one of Barron’s top financial advisers, shared his cautious approach and highlighted the deteriorating fundamentals.

When asked about his stance on the market, Saperstein clarified that while they are not holding onto cash, it has been shifted into bonds since September.

He pointed out several concerning factors affecting the economy, such as a negative M2 for the past six months, a decline in consumer spending, and tightening credit availability.

Additionally, leading economic indicators are dropping, leading him to expect a slowdown in the economy during the second half of the year.

The interviewer mentioned that the market has been more resilient than anticipated, with positive factors like retail sales and employment.

Saperstein acknowledged these positives but pointed out that even major players like Home Depot reported less favorable results, suggesting underlying weaknesses.

He also emphasized that the market’s performance has been primarily driven by big tech companies, which heavily influence the S&P index, while the broader market hasn’t been trading well.

The conversation then delved into the issue of a top-heavy market, where mega-cap companies disproportionately impact the overall market.

Saperstein disclosed that they are overweight on big tech in their portfolio and don’t see it as a problem for the market.

However, he expressed caution due to the deteriorating fundamentals rather than the market leadership of tech companies.

The interview touched upon the narrow breadth of the market, where fewer stocks are driving the overall performance.

Saperstein reiterated their cautious stance, explaining that they are concerned about the fundamentals rather than the market leadership.

He highlighted the significant influx of liquidity from 15 years of quantitative easing and a $5 trillion fiscal push, suggesting that the excesses need to be balanced out.

Saperstein predicted a slowdown in the second half of the year as these excesses are being corrected.

When asked about the Federal Reserve’s actions, Saperstein indicated that he believes they are done raising rates.

He also mentioned the conjecture surrounding the resolution of the debt ceiling, stating that its resolution would result in tightening measures.

Specifically, he explained that Treasury Secretary Yellen has been depleting the Treasury General Account (TGA) by not issuing Treasuries, while Fed Chair Powell continues quantitative tightening (QT).

Once the debt ceiling issue is resolved, Yellen will have to rebuild the TGA by issuing an estimated $600 billion worth of Treasuries in the second half of the year.

This combination of factors, along with the lingering banking crisis drama, contributes to the tightening environment.

Saperstein’s cautious outlook reflects his concerns over the deteriorating fundamentals of the market.

As the Treasury Partners’ Chief Investment Officer, his insights provide valuable perspectives for investors navigating the uncertain market conditions.

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