‘Skepticism’ is based on an apparent disconnect between presently weak economic conditions and the recent performance in equity markets. These two things are always disconnected as present market conditions reflect market expectations ~6-9 months forward.
Recessions take some time to run their course due to a negative feedback loop that runs from weak labor markets to weak consumer growth to weak corporate profits to weak labor markets. The labor market is most important and the reason economists focus on weekly
Elevated bearish investor sentiment and still cautious positioning continue to keep the pain trade aimed higher. Recent outperformance from cyclical sectors also giving broad market strength credibility amid widespread press skepticism. Other cross-market indicators like US Dollar Index weakness and the performance of Copper relative
The recent relative outperformance of cyclical/value sectors (Consumer Discretionary, Industrials Financials, Materials and Energy) is sending a positive signal for the US economy and equities broadly. Defensive sectors (Consumer Staples, Utilities, REITs, Health Care and Communication Services) led new record highs in the SPX last
As noted yesterday, the S&P 500 successfully cleared technical resistance and the 250-day moving Volume Weighted Average Price (VWAP) of ~$298 for the SPY (SPDR ETF), a level (give or take ~2%) that typically leads to increased buying interest from systematic strategies.
With the SPX now through 3000, it makes sense to focus even more attention on internal signals in sector and cross market divergences. The years-long disinflation cycle has pushed two highly cyclical sectors (Materials and Energy) into the ‘value’ style along with Financials that rely
The cyclical/value rotation from last August and September was based on rising expectations for above-trend global growth. The catalyst was a Fed-led monetary easing cycle over the prior six months as an offset to trade-related headwinds. It was actually the easing cycle and rising expectations
The S&P 500 is currently trading above key technical resistance at ~2950, above its 200-day Moving Average and above some popular CTA triggers levels…intraday. Cyclical sector outperformance is also an encouraging internal development this morning, but the close matters most. Sustained closing levels north of
US equities mostly lower with the S&P 500 still on track for a +2.5% weekly gain. Bond proxies and defensive groups advance this morning, while cyclically-sensitive Energy, Financials, Industrials and Materials come for sale after 5 straight days of leadership. Treasury yields are lower with
Yesterday’s release of the most recent Fed meeting minutes confirmed our expectations that QE purchases will conveniently match Treasury bond issuance. The four-session-long bond yield back-up and curve steepening trend paused today in an apparent acknowledgement that Fed officials have Treasury bond issuance (to pay
