Inside Markets — Aging Bull Market
Aging Bull Market
June 27, 2024
Quarter-end pension fund rebalancing officially ends tomorrow, but the dynamic was largely played out by Tuesday’s close. Rebalancing flows favored bonds over stocks, put pressure on QTD equity winners, provided a tailwind to cyclical/value names and resulted in a temporary improvement in market breadth. Weak market breadth and narrow AI leadership will likely resume in the weeks leading into CQ2 earnings season. While its not our expectation, there’s a chance for equity participation to broaden out as better CQ2 earnings lead to rising out-year estimates revisions. The resumption of a familiar trend (weak market breadth/narrow leadership) could carry the SPX to next level resistance near 5545 (implies upside of just ~1.4%). Unfortunately, narrow leadership, rally deceleration (also now present) and an inverted yield curve (new record in terms of duration) are all hallmarks of an aging bull market – and we see increased downside risk in the second half.
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