The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Half-day, full rally.
Futures were about flat when June nonfarm payrolls (+147k vs +106k est & +144k prior revised from +139k) printed. S&P futures climbed 15-20 points and Treasury yields climbed across the curve. Estimated Fed cuts shrank and the chance of a cut from the Fed on July 30th fell to less than 5%. The real bullishness kicked in after the open and the S&P was +50 points by lunchtime. The priced cuts for Fed Funds for the rest of the year are now 51 bips. It was 65 yesterday. A big change.
Investors threw the nonfarm data in the confirms-a-good-economy pile and went to work. This isn’t rocket science. The trend is higher, you buy the dip, you buy the rip.
When in doubt, consult the chart.
Look at that.
The *only* reason to fight the chart and doubt the trend is if you *forecast* a huge turn in economic circumstances. That will not happen, in the current environment, without a lot of advanced warning. Investors rightly see clear skies on the horizon and they are front-running the future.
Of *course* things will change. Valuations will stretch too far. Growth will roll over. Stocks will fall significantly and perhaps we’ll get a nasty bear market. But that day isn’t today. Nor will it be soon.
Only a bolt from the blue catastrophe can do the two things necessary to reverse the US equity trend:
Even if some economic data turns, the investor community is so confident, out of habit, that it will buy-the-dip and keep the rally going regardless.
This is good for the short term and very dangerous for when the world eventually turns.
Nobody has worried about eventually for a long time. Why start now?
Markets are closed tomorrow. See you Monday. Happy Fourth of July.
-Mike
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