Chicken Little, Why still bearish?

The Chicken Little remains 99% + 1% bearish. Why?  

Bear is just resting, hasn't gone away

Peak Fed

I remain 100% negative on markets. Meanwhile the world is in Peak Fed euphoria. Bullish investors think the Fed is about to pause and then cut rates. Bearish investors think that Fed will stay higher for longer. 

Bulls and bears both believe the Fed is omnipotent. A maestro of markets. Calling the tune in inflation and interest rates. 

The reality, I believe, is that Fed is corrupt, incompetent, and ultimately impotent to stop financial chaos. This will only become apparent as markets fall. The Fed will then be shown to be unable to stop the declines. 

Quantitative reasons to be negative
Stock prices are supposed to be discounted future earnings, dividends or cash flows. Earnings estimate continue to go down, while discount rates continue to rise. 

Two charts to summarize the situation. Declining earnings and tighter money. 

Earnings are declining (from Ed Yardeni)

Quantitative tightening by the Fed

Earnings are going to be lower in 2023 than 2022 - Q: why are stock prices higher? A: Mania. 

The Fed is shrinking its balance sheet aggressively. For years, the Fed paid for US government deficits by printing money. Now, we have to sell bonds to pay for the deficit, and the Fed is effectively selling bonds. The result will continue to be rising, real (inflation-adjusted) interest rates. 

Qualitative reasons to be negative
We just lived through an historic period of overspending, printing money and wild speculation. 2022 was a negative year, but to me it seems impossible that decades of foolishness have been removed in just one year. The piper still needs to be paid.  

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