The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Persian confusion
The US/Iran situation isn’t proceeding smoothly. It isn’t bothering markets much either. The headlines get attention but the markets don’t react much. Crude traded up, and yields climbed, and the Dollar strengthened. Those are the typical war-is-worsening trades. On the other hand, stocks climbed. That’s a typical peace-is-coming trade. Precious metals were mixed. In the S&P 500, tech was the leading sector while utilities lagged. Capital flow was notably higher today, 125%.
The US/Iran situation is certainly a headscratcher. Crude and bonds are still paying attention and each setback in the negotiations, moves those markets. Equities appear to have moved along, returning to the AI narratives that were so powerful. Whether investors are embracing the AI story or not, the momentum of the equity market is becoming a self-fulfilling prophecy.
The equity bull market is now becoming a scramble. Offers are getting lifted regularly and the trend is more than your friend. The market is almost chasing the tape higher now. We are not far away from a euphoric casino-like environment.
We all know this is an unsustainable path. That said, the upside party doesn’t have to stop today. We can, and probably will, experience more upside in the short term. I have no idea how much longer this leg in the rally could last.
It could be the rest of this week.
It could be the whole month.
It could be the whole summer.
Just because we’ve come so far, so fast doesn’t mean we have to turn around. Throw away your favorite models, charts, and technical indicators. They will not work for this stretch of the market. This is a psychological phenomenon where the crowd is sentimentally aligned. Most of the crowd expects the bull market to continue. Most of the crowd expects improving fundamentals. Most of the crowd expects today’s prices to be eventually justified.
Swirl all that together with the recent price history of the market and you have a runaway train to the upside.
I don’t want to claim that it will end ugly, although that’s what many old dogs in this market think.
I do know that if it goes on for a while, the upside will be too absurd to believe and too lucrative to forego. The longs are getting longer and anyone with capital on the sideline feels compelled to get in and enjoy the party.
This environment is beyond optimistic.
See you tomorrow.
-Mike
Visdom Market Commentary
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