Author: jsc

The rapid acceleration we’ve been expecting in global growth has started.  US credit card spending data accelerated 1800bps last week and mobility data is also ramping. 

Our focus has been on adding cyclical/value equity exposure since real yields bottomed in mid-September. Since 9/15/20, the S&P 500 Value Index (SVX) has outperformed, up +23.64% vs. the S&P 500 up +15.87% and the S&P 500 Growth Index (SGX) up +9.58%. 

The S&P 500 is consolidating after another period of decelerating price trend momentum. We saw similar activity mid-last month with a peak-to-trough decline of ~4.5%.

Reopening beneficiaries have been under pressure over the past two sessions, ostensibly based on rising case counts in pockets of the US. The market has been ‘looking through Covid’ for several months, so what’s different now?

The bond market has been under consistent bearish pressure over the past 5 weeks despite deeply oversold conditions. During that time, 10-year bond yields impulsively broke through three consecutive resistance levels with the most recent break occurring at 1.62%-1.70%.

We’ve already seen a very large rebound in goods prices with booming factory output and the case for inflation now depends on the services sector, which depends on herd immunity.  The current US vaccination pace should get the country to herd immunity within 40 days.

This week’s ECB meeting provided a one-day pause in the backup on promises of accelerating bond buying. With 24 hours to consider the consequences, markets have realized the stepped up pace only exhausts the ECB’s existing PEPP program sooner than expected and backup has resumed.

The NASDAQ 100 is rebounding as 10-year yields consolidate below technical resistance in the 1.61-1.70% range. A sustained NDX close above 12,750 should generate a further rally to test the mid-February record high of 13,807.

Decelerating price trend momentum in the S&P 500 (SPX) from mid-February resulted in a pull back to technical support in the 3700-3750 range (real support as low as 3620). Thus far, the SPX held that level and the NASDAQ has held it’s support level in

Today’s reversal in bond yields follows our technical script with 10-year yields fading near secondary resistance in the 1.65-1.70% range.  Expect a period of consolidation that could take 10-year yields down to ~1.34%.