The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Clawing.
S&P futures traded about +20 in the early morning but they faded as we approached the open. Early morning news was immaterial and there were no macro data releases. Futures simply weakened ahead of regular trading. The index opened down about 10 points and tried to make a go of it, but failed around 10 AM. The index dropped, rebounded, and dropped further. Tariff talk and all kinds of political shenanigans were stirring up concern and the market bottomed at 1:30 AM, down 86 points. That was a bleak moment. The index came roaring back and broke into the green for about a half hour. The market re-faded late. Yields swung from lower to higher over the session and Fed Funds now price 77 bips of easing in 2025.
The market is desperate to halt the downward path of stocks and the buyers did their thing again today, successfully turning the tape in the early afternoon. There have been so many failed attempts by the dip-buying crowd over the last month that today’s result is noteworthy.
The fundamental situation is not very different today. Perhaps the cooling of the US/Canada trade rhetoric means that things won’t get worse but the path we’ve already tread is a slowing-growth path. The damage is done. If US growth isn’t 3-ish percent, like we all expected a few months ago, where’s that leave us with equity valuations?
We sure as heck aren’t going back to prior all-time highs (6147 on SPX). Maybe we recover a bit as emotions settle? That’s about as good of a bull case as one can make right now. And there are downside risks still to consider. Recession remains a potential outcome.
The sentiment of the day went from bad to worse to OK to bad. That’s better than yesterday but only relatively speaking. The bulls are scratching and clawing their way through this market, with success existing only within windows of time, minutes and hours here and there.
At some point the bulls will trigger a squeeze and control the close but who knows when. Who knows how long they’ll keep it going too.
I don’t want to try to join them.
See you tomorrow.
-Mike
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