The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Climbing.
Mid-East headlines swirled through news organizations overnight and during the day but they didn’t affect markets much, except for when President Trump claimed the ceasefire between Iran and Israel was in effect, which inspired further risk-on reactions. The S&P 500 opened around +40 points and began its steady climb higher around the mid-morning. Intraday highs printed late in the day and market attitudes are solidly optimistic and unconcerned. Yields mostly fell across the curve and Fed easing expectations are increasing a bit. Fed Funds futures price 60 bips of Fed cuts by the end of the year. That’s a level not seen since early May.
While news organizations are breaking headlines left and right, and average readers are swooning from the drama, markets are yawning. Markets already decided what they thought about the situation yesterday and they are confirming it today. Investors view the situation as effectively concluded and they are moving forward.
As we discussed yesterday, this thinking will only be wise or foolish in hindsight. As long as a bolt-from-the-blue never shows, the bulls will be vindicated. To general audiences, headlines may seem scary but Wall Street views the drama as performative. The conclusion has been made that Iran is no longer a viable threat to capital markets and so investors became sanguine in two sessions.
The short-term task for US stocks right now is to print brand new highs. 6147 is the prior high for the S&P. It printed on February 19th. That’s a long time in the making, according to the bulls’ way of thinking. We are now less than a percent below that, something which can be done in a run-of-the-mill positive session.
It’s likely happening soon. For all the fundamental shocks we’ve worried about, reality never delivered the bad outcomes. And investors always returned to risk-on, some sooner than others. Now the lesson is learned. Who’s going to fight the tape? Look at the chart.
Who’s going to fight this?
Nobody.
See you tomorrow.
-Mike
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