The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bounce.
Like so many past days, S&P 500 futures traded higher overnight. Futures added to their gains as Europe traded and by 8 AM they implied 40 points of upside for the index. Feb CPI YoY (2.8% vs 2.9% est & 3.0% prior) data helped the bulls in the moment. The index opened trading around +60. Morning bears showed up as usual and drove the index into negative territory around 11 AM but the dip only lasted 30 minutes. Buyers ramped prices higher as fast as they sunk and the S&P traded around +40 points for the bulk of the day. Tariff talk continues to concern markets but it didn’t bother US stocks very much today. Growth concerns lessened a touch today as well with Fed Funds pricing 69 bips of cuts in 2025.
Longs certainly welcomed today’s gains. The headlines, which were blah, didn’t have much to do with the rally however and while the softer CPI data was helpful, it wasn’t critical. The market seems to have digested the slower growth trajectory of GDP and is factoring in a probability of recession going forward, albeit a small one. Perhaps this means that we’re in a trading range appropriate for the current perception of the investment landscape. I think this is a reasonable conclusion. Upside and downside from here won’t be very interesting, until we get some new material news.
What do we think the next major surprise will be? That answer should dictate our equity posture for the here and now.
Major economic releases are *not* likely to be a catalyst for a while. The data is mostly from February and slow to react to economic shifts anyway. Weekly jobless data (225k est vs 221k prior) is a different animal though and it releases tomorrow. It’s from last week but it could show the first DOGE effects. If the number surprises strongly, I think the market will ignore it. Investors will just tell themselves that the DOGE data is delayed. If it shows significant weakness, the market will react badly. It’s a bad setup for the bulls, I think. We shall see.
Setting aside the weekly jobless data, what other news development might materially surprise the market? Tariff talk is high on the list. Currently the rhetoric is bad and heading towards worse. Almost every headline covers a new tariff in retaliation for a prior one. The market is starting to get accustomed to only bad news on that front. What if Trump and some major trading partner come to a quick and clean agreement? That kind of good news would certainly spur bulls onward and upward. That might be a true tradeable bottom
The question for us is… how likely is a bolt-from-the-blue trade agreement?
By definition, it could happen at any time. I think everyone is going to have to feel some significant pain before leaders come to the table to fix things.
Have you felt significantly pain? Has the public? Have the overseas trading partners?
Not yet.
For that reason, I think more pain is coming until tariff news will be ripe to surprise to the upside.
See you tomorrow.
-Mike
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