The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Repair project
Despite apparent setbacks in the US/Iran situation over the weekend, US equities wanted to get to work repairing the damage of last week. US Treasuries and crude went the opposite ways, moving according to the war-is-worsening playbook. The S&P 500 bucked that trend, opening about +60 and spending the day in the +80 to +30 range. The index did leak some value late in the day, a troubling sign for the longs. Tech led the market upward however, which looks like typical buy-the-dip characteristic.
Financial headlines and data were unremarkable and markets didn’t experience much in the way of fundamental catalysts either. Crude and bonds reacted to the geopolitical news while US stocks benefited from an improvement in sentiment, relative to Friday.
I’m sure some investors felt better about stocks simply because of the look of the chart. Perhaps US equities are numb to the US/Iran headlines at this point. The back and forth nature of that situation is so repetitive that the stock market is starting to ignore it. This probably has inherent risk that’s worth considering but perhaps if the stock market is confident that a peaceful outcome will eventually come, it really doesn’t have to fret about the time table.
Considering how news-lite today was, maybe the price action was just the result of a dip+1 flavored going-through-the-motions day. Investors might wait until they see the next inflation data before acting with conviction.
I’m not highly confident that stock investors are sitting on their hands until CPI and PPI but it also makes some sense. If you are an institutional buy-the-dipper, you probably aren’t worried about missing potential upside between now and the inflation releases. You are probably very worried about getting stung by a hot print though.
If I’m right, the tape will be mostly quiet until Wednesday morning’s CPI (+4.2% est vs +3.8% prior).
See you tomorrow.
-Mike
Visdom Market Commentary
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