The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
New highs.
Futures traded about +15 as we approached the open. That implied new highs and that’s what we got. The S&P opened about +15 points and climbed further in morning trading. The index topped out at +46 and rolled over in the afternoon, giving back most of the morning’s gains thanks to a Trump tweet about halting trade negotiations with Canada. The market leaked value before bouncing late. Yields climbed and Fed cuts are now priced at 64 bips for the rest of the year.
New highs today close the chapter on the selling from February to April. All the dip-buyers are heroes and the market has reinforced its belief in the power of the bull. Pops and drops will occur, of course, but the dip-buying belief has become the new religion. It will not fade away. There is a hidden danger that comes from the widespread and deeply held belief that the only proper behavior for stock investors is to buy.
That belief will be tested many more times going forward but investors will buy buy buy in the midst of almost any negative news. And they will buy buy buy thereafter until they push prices above where they were beforehand.
This means that the bull market we currently have isn’t going anywhere. The only way this ends is that the negative news event is large enough, and nasty enough, to scare the believers into inaction *or* the margin clerk gets involved.
Will a recession be something big and nasty enough to result in that scenario? I think it will.
If I’m right, we’re going to go higher for longer because there’s no plausible recession on the horizon. Dips will be shallow and brief. Only when the recession eventually arrives, will the pain come…. but oh brother will that be painful. It’s going to be carnage.
Along the way, down sessions will simply inspire most investors to push in further. The coming rallies will be numerous and significant.
As a value-biased investor, it’s difficult to hit the buy button currently. However, if one can become a momentum-based investor, the trend is your friend and the trend isn’t changing anytime soon.
It feels like we’re about to indulge in a speculative mania. That’s going to be very lucrative for anyone with the courage to ride the wave. You just don’t want to be left holding the bag when the music eventually stops.
See you Monday, have a great weekend.
-Mike
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
