The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Resume the rally.
Quiet headlines continue and investors appreciated the situation. Futures were off a bit in the premarket but PPI data (2.6% vs 2.6% est & 2.5% prior revised from 2.4%) reinforced what CPI data showed us yesterday, that inflation isn’t an issue. The S&P 500 opened down about 15 points but rallied to unch’d within an hour. The index spent the rest of the session in positive territory and while the capital flow was light (86%), the tape was steady. Yields fell today and the bond market looks like it’s beginning to relax somewhat. A strong 30-year auction helped settle nerves in that market significantly.
The tone of the day in both stock and bond markets is positive. The stock market continues its bounce from the April lows and equity investors view being long akin to soaking in a hot bath, it’s all calmly wonderful and they never want it to end. They don’t expect it to end either. The view in Stockland is that the market has undone the shenanigans of the tariffs. It still has yet to reflect the optimism of the next few years though. Their conclusion is that we’re going up, we’re going up for a long time, and there’s no reason to think otherwise. Complacency is the accusation by the bears but the bulls don’t care because they’ve got the recent gains, the long-term gains, and control of the tape.
The bond market is facing a different situation. It too was rattled significantly this year but the bond market doesn’t have a bullish history to use as psychological support, like the stock market. The bond market narrative continues to be quite bearish actually and only in the last few weeks could one argue that yields are not destined to climb ever higher. As bond investors start to imagine a world of lower rates, something unheard of a couple quarters ago, they remain emotionally cautious.
My point simply is that both markets are feeling bullish right now but the stock market has felt this way for years and there’s an arrogance as a result. The bond market is feeling bullish but the feeling is new and it doesn’t feel confident that things can continue this way for a while.
What does this all mean? It’s unclear. Quiet news and data will keep the party going for both markets. With one day left in the week, it looks like politicians and the world want to cooperate.
See you tomorrow.
-Mike
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