The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Momentum.
Futures chopped around overnight and in early hours trading. They didn’t trend anywhere. The S&P opened down small, -10 points. We popped and dropped for two hours, trading around yesterday’s closing level. Around 11:30 AM, buyers started pushing the tape upwards and the rally fed on itself, with a small pause after lunch. News today wasn’t a catalyst. Today’s gain looks inspired by the midday rally and in an environment where the S&P 500 moves multiple percent each day, it makes sense that capital will hop onto whatever intraday trend it thinks it can find. Yields climbed modestly across the curve, which might suggest less recession risk but shouldn’t go hand-in-hand with a 1.8% gain in stocks. Capital flow was almost normal today, 107%.
Macro data today was a little bit interesting. March PPI (2.7% vs 3.3% est & 3.2% prior) was quite cool. This would have been wonderful news. This reinforces the cooler March CPI released yesterday too. The problem is that the world radically changed in April. March inflation data might also reflect an already slowing economy. The point is that given the shocks that markets felt recently, this inflation news was dismissed. That’s probably the proper choice but it’s wild to think these data didn’t matter much in the moment.
Additionally, the tariff talk has affected perceptions. April preliminary U Michigan survey results came out at 10 AM today. Sentiment, current conditions, and expectations all surprised negative, greatly. The most notable datapoint was 1-year inflation expectations (6.7% vs 5.2% est & 5.0% prior). Ooof. That’s bad. Joe Average *expects* tariffs to affect the economy in the same general way that Wall Street expects tariffs to affect the economy. The unknown for the both the Street and the layman is how much *less bad* the situation is now…. And how much that will change forward-looking expectations and plans.
Time will tell. I don’t know what sort of data we will see first that will give us a clue as to what the last two weeks will actually mean to GDP, inflation, earnings, etc. Markets usually focus on weekly jobless but given the highly sensitized investor population, any tidbit of economic data could influence price action significantly. Keep your Tums handy.
See you Monday, have a great weekend.
-Mike
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