Markets Have Yet to See a ‘Deflush,’ Strategas’ Verrone Says
Why It Matters
Understanding that the market has not yet flushed means equity valuations may remain resilient, while potential central‑bank rate cuts could reshape risk‑on strategies for investors.
Key Takeaways
- •Global equities remain in uptrends despite lacking deep market flush
- •S&P shows 40% above 50‑day moving average, no new lows
- •Call ratio stays benign, indicating limited short‑covering pressure
- •Energy and rates have been repriced; growth valuation now under review
- •Central banks likely to cut rates if energy shock worsens, not tighten
Summary
Chris Verrone of Strategas warned that, while most global equity markets continue to ride an uptrend, the anticipated deep market flush has not yet materialized. He highlighted that roughly 40% of the S&P 500 sits above its 50‑day moving average and that the call ratio remains benign, suggesting limited short‑covering pressure and no new lows on the horizon.
Verrone noted that the market has already repriced energy and rates, and is now turning its focus to growth valuations. He argued that central banks have learned not to tighten policy in response to energy shocks; instead, if the shock intensifies, they may be forced to consider additional rate cuts rather than further tightening.
Key remarks included, “we haven’t seen the big surge and new lows yet,” and “central banks have learned you don’t tighten into energy shocks.” These comments underscore a cautious optimism, with the analyst keeping an eye on consumer discretionary versus staples performance as a barometer for broader economic health.
The implication for investors is to stay price‑first, monitor growth re‑pricing, and be prepared for a potential policy shift if energy pressures worsen. A continued equity uptrend combined with a benign short‑covering environment suggests limited downside risk in the near term, but volatility could rise if macro‑economic conditions deteriorate.
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