“The most intriguing aspect of Wall Street’s behavior is that if we examine every period of industry decline over the past several decades, we see that stock prices reach their lowest point when the industry only starts to experience a fall in earnings, well before the trough of earnings. The stocks were already recovering and surging by the time layoffs and consolidation occurred.“
Semiconductor index (SOX) is up strongly since October lows and earnings cuts have only just started i.e. a typical pattern with the expected bottom of the cycle is Q2 2023.
Yet, as argued here, this cycle appears different – (1) days of inventory at record high which will take, despite a desire for supply chain resilience, more than two quarters to clear (2) there is an oversupply of certain process tech (3) channel stuffing has been a big feature.
