The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Stepping back.
Markets pared some of the recent gains today, dipping under the previous resistance levels. News wasn’t too significant although the Trump, Zelenskiy, Putin situation continues to generate headlines and head scratching. Data today was unremarkable and Walmart’s guidance suggests the future isn’t so certainly positive. The bond market rallied some, dropping yields 1-4 bips across the curve. Fixed income investors seemed to support a cooler potential future path but they aren’t worried about anything either. It feels like a probability adjustment rather than an anticipation of a recession. Fed Funds futures fell about 2 bips across their curve too, supporting the move in Treasury yields. Fed Funds futures now imply 39 bips of Fed easing by year-end. That’s not a market worried about an economic contraction.
If the narrative of the day was one of economic cooling, it wasn’t really concerning to stocks. If growth of any kind, even just a downward revision to estimates, were truly worrisome to stocks, we’d be experiencing significant declines. The multiples of this market cannot tolerate growth disappointments. The modest drop in the S&P 500 suggests that the drop in price is more flow and asset-allocation driven than a lack of faith in the bullish future of stocks.
There’s a stubbornness in place in the equity market. The bears have been dismissed as boys who cry wolf. The bulls have only ever been right. It’s a lopsided sentiment space and it won’t change until/unless something fundamentally shifts the investing landscape.
Maybe today was a hint of the future but even if we could prove that were true, the market would not take it seriously. Bulls see today as a trivial retreat from the latest highs. It’s just another dip to buy. Until an actual growth shock or revenue/earnings disappointment plops down on our doorstep, every *tidbit of concern* is just a false alarm.
See you tomorrow.
-Mike
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