Miller Tabak's Matt Maley: Earnings are growing, but not enough to push markets much higher

Market Overview & Economic Concerns - Earnings estimates are declining, with decreases observed in almost every week over the past 10 months, specifically since April [1][2] - The economy is slowing, evidenced by economic surprise indices and retail sales data [3] - Market's high valuation, trading at over 22 times earnings, more than three times sales, and more than five times book value, raises concerns [3] - Risk-reward equation favors risk, suggesting a defensive posture [4] Investment Strategy & Defensive Positioning - Recommends raising cash, suggesting a 10-15% cash position is currently yielding returns [4][5] - Stock market upside potential is estimated at 3-5%, while downside risk could be 15% or more [5] - Suggests gold as a defensive play, noting its outperformance of the stock market since the 2022 bear market lows [6][7] - Advocates for at least a 5% allocation to gold, potentially more, given economic and geopolitical uncertainties [7] Macroeconomic Factors & Policy Impact - Wage inflation is a real factor impacting businesses [9][10] - The timing of potential Federal Reserve rate cuts is uncertain, with conflicting signals from Fed officials [10] - Concerns exist regarding the impact of the tax bill on the budget deficit [11][12] - Maintaining some cash enables investors to avoid selling at market bottoms and provides opportunities to buy during downturns [13][14]