Strong Fundamentals Keep Equities Resilient Amid Mid‑cycle Economy
The saving grace for equities are strong fundamentals with a US economy firmly in mid-cycle, earnings estimates growing at double digits, and valuations not out of whack against metrics such as credit spreads and operating margins. https://t.co/YcF7Fv550i
Investor Sentiment Still Below Crossover Amid Shifting Headlines
A longer term measure of sentiment (the Investors Intelligence survey below) shows that sentiment has not “crossed over” as it did a year ago. Maybe that will still happen now that the headlines have pivoted again. https://t.co/UFEsFhZhJf
Market Rally Fueled by Call/Put Oversold Reversal
One support behind the market’s surge last week was the reversal in sentiment from an oversold extreme, at least as judged by the call/put ratio. That ratio is still negative. https://t.co/i43C3jXDt6
Dollar's Reserve Role Erodes as DXY Stalls Below
The other side to the toll booth narrative in the SoH is that the dollar will continue to devolve as the dominant reserve currency, as more and more of the world’s trade takes place locally or regionally. With that in...
Diversifiers Shine as Equities and Bonds Re‑correlate
With equities and bonds positively correlated again (a déjà vu to 2022), it’s good to see that the group of diversifiers that I have in my hypothetical 60/20/20 model have been doing their job. The chart below shows the “crawling”...
Bitcoin Climbs as Strait Tolls Pressure Gold Reserves
One emerging narrative resulting from the Iran conflict is that Iran will more or less control the Strait of Hormuz with a “toll booth” approach and that countries might pay those tolls in Yuan or crypto. Meanwhile, the exporting countries...
Oil Spikes Trigger Swift P/E Collapses, History Repeats
The markets have been pricing for a quick end, much like what happened during the 1990 Gulf War. The analog below shows that the surge in oil prices to $100 (in today’s terms) was quickly reversed, and with it so...
S&P 500 Missed Oversold Low; Further Dip Needed
The weekly chart below shows that the S&P 500 index stopped short of an oversold extreme at its March 30 low of 6317. We never got that juicy entry point. We’ll see how the market reacts as the headlines continue...
Equities Rally on Hope, Valuations Still Under Pressure
Equity markets gapped higher last week on hopes that the negotiations in Pakistan would lead to some sort of détente. The week closed with an S&P 500 index at 6816, a mere 2.6% below its all-time high set on January...
Amid Volatile Headlines, Revisit Your Investment Thesis
It’s getting increasingly challenging to write my WAAR these past few Sundays, given how much the headlines keep lurching back and forth. Truce one day, threats of extinction the next, and back and forth we go. My inclination these days is to...
Commodities Hit Record Highs, 83% in Uptrends
Commodities (per the Bloomberg Commodity Spot index below) are at new highs, driven largely but not exclusively by energy. Some 83% of the components in the BCOMSP are in uptrends. https://t.co/p7ml7lMWnw
Rethink 60/40: Seek Uncorrelated Returns in Commodities and Alts
The positive stocks/bonds correlation highlights the need to think beyond the 60/40 model in order to find other sources of uncorrelated returns. Fortunately we have those in the form of commodities and alts. https://t.co/l0uBYTBbYD
Commodities Remain the Purest Diversifier Amid Correlated Markets
With equities and bonds once again positively correlated, the purest diversifier have been commodities. https://t.co/ZPvc20l8qu
AI Boom Avoids Bubble as Investors Pose Tough Questions
Just six months ago the question of the day was whether the AI boom was turning into a bubble. Fortunately that did not happen, or the current drawdown would likely have been much bigger. Instead of the AI leaders heading...
Margins Hit 15% New Highs, Driving Valuation Surge
Margins are also making new highs (now at 15%), which goes a long way to explain the elevated valuation backdrop. https://t.co/etb3rBke43
