Like Saturday’s successful SpaceX launch, the rebound in U.S. stocks since they hit the March 23 low has been stellar. The S&P 500 index’s best two-month’s since 2009.

Optimism over the nation’s gradual reopening and progress towards the development of a coronavirus vaccine has lifted the S&P 500 36 percent. Cutting losses for the year to 5.8 percent. Last week, the index rallied another 3 percent. The S&P 500 rose 4.53 percent in May. Which followed an April return of 12.68 percent.

It becomes more difficult by the day to argue that this remains a “Bear-Market Rally.” The higher prices go, the more the market confirms this is no drill, but a legitimate move higher.

Investors have embraced signs that economic activity could resume faster than most expect across parts of the U.S. and around the world. Restaurant bookings, hotel spending and airline travel appears to be picking up. Coinciding with a decline in daily new virus infections. This missive has long held that the best means of research usually arrives via the empirical evidence immediately before us. Michigan’s Consumer Confidence Index? After a weekend of watching people enjoying out and about, one easily discerns that confidence has elevated month over month. Crowded restaurant patios. Busy boutiques. Walkers. Runners. Images of crowds on Florida beaches. All signs of people ready to resume their normal lives. Continue reading →

Following the Chief’s 31-20 Super Bowl victory over the Forty Niners, we close out yet another football season. Leaving millions of red-blooded American (and foreign) football fans with no gridiron outlet for eight months. No pre-ordained ritual permitting them to block out the rest of the world while college and NFL games play out before them like visual manna from heaven.

The bright side? The opportunity to focus on other stimulants. Perhaps the newest le Carre novel. The stack of magazines on your desk. Some binge-worthy television. Or (gasp) even the threatened species once known as an afternoon with the family, Devoid of television, screens and other distractions. Or hell, even the stock market.

It’s earnings season, baby!

While more than 110 million Americans tuned into the the previous Sunday night’s grid-iron extravaganza, market observers noted that the stock market’s uptrend remains intact despite the Wuhan coronavirus epidemic that has provide epic media fodder fare and wide. Continue reading →

Heading into the final two weeks of 2019, the S&P 500 had soared 28.5 percent, while a bond rally has pushed the yield on 10-year Treasury notes down more than three quarters of a percent. If such gains continue through New Years, it will mark the first time since 1998 when stocks have jumped by at least 20 percent while Treasury yields declined by an equal amount.
More importantly, The Santa Claus Rally has achieved lift off.
At this point, even the skeptical money has begun to find its way into the market. Especially as investors become unnerved by FOMO (fear of missing out), a psychological tendency that impacts human cognition when inundated with the idea of missing out on some positive occurrence or event. Three months ago, these same investors wanted nothing to do with equities. But, tidal flows change quickly. And who can blame them?

We have a strong economy. GDP rose by 2.1 percent in Q3, in line with the consensus and matching the prior quarter. We have the lowest unemployment rate in 50 years. Rising wages. Consumer spending. These represent the kind of fundamentals that should keep the bulls running into next year.
Accordingly, $43 billion has flown into equity funds the last six months, the best capital flows since March 2018. Confidence fueled by an improving global trade outlook and belief in the prospects for global growth.
Which explains why the S&P 500 recently crested above 3,200 for the first time.

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Stocks extended their winning streak last week. As the Dow has risen four weeks in a row, the S&P has been higher six weeks in a row, and the Nasdaq has been up seven weeks in a row.
YTD, the Dow began the week up 20.1 percent, the S&P is up 24.5 percent, and the Nasdaq is up 28.7 percent. All occupy new all-time highs. And 2019 still has a month and a half remaining.

Many investors expect to see a powerful Santa Clause (year-end) rally. Especially given the strength of the economy and record low unemployment. Moreover, traders expect the U.S. and China to formalize and sign a phase one trade agreement within the next few weeks. And for the House to pass the USMCA deal by year end, after which it should quickly sail through the Senate.

All of which leaves 2019 looking like a truffle digger’s average day… Investors find themselves in a pretty good place. But they dug through a lot of shit to get there.
2019 marks an historic time for the economy and for markets. Both continue to set record after record. Some market observers believe that a “melt-up” is in play. Whereby stock trajectories go parabolic towards the end of a bull market in one last gasping, quantum leap higher. Consider 1999. A year in which the Nasdaq index rocketed 100 percent higher. Yet, even amid that big move higher, the index incurred five violent pullbacks of roughly 10 percent or more.

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Last week saw markets continuing to respond to headlines like Pavlov’s Dog did the dinner bell. Take last Friday’s news that the U.S. could de-list Chinese companies from U.S. exchanges. Equities went from positive territory into a steep, downward slide.

Earlier in the week, impeachment talk had sent investors scurrying like rats from a sinking ship. Until they realized that Republicans still control the Senate. Which likely renders any such proceedings more Kabuki Theater than serious political drama. With less attention being paid to potential outcomes than on the circus leading up to it.

Still, September’s ferocious reputation as the “Year’s Worst Month for Stocks!” proved rather benign. The S&P 500 finished two percent higher. And most indices re-established the upward trendlines in place prior to July’s declines.
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Broader market indices drifted lower last week. Though it could have been worse. Following the previous Thursday’s move higher, the market plummeted four percent. Falling Friday through Wednesday. Only to claw back two percent of those loses last Thursday and Friday.

Why the quantum leap in volatility?

The dreaded yield-curve inversion broke the water’s surface. Leaping and twisting like a crazed, sun-drenched marlin that can’t take enough line. And when the lethargic anglers on the boat’s stern caught sight of such an oft-discussed yet rarely seen apparition, their collective yawl was enough to alert those half a sea away.

After years of inversion-related banter, yields on the 10-year Treasury fell below two-year yields for the first time since 2007. The yield curve typically inverts because investors feel better about long-term economic prospects than those in the immediate future. Rendering them willing to accept a lower rate of interest to park capital well into the future, or further out on the yield curve.

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These last two weeks saw stocks storm the castle ramparts. Elude the archers. Scale the walls and wrest control from the bears. By week’s end, former record highs were conquered. With bulls establishing camp upon the newly taken plateaus of all-time highs. As equities forged ahead. Endeavoring to unite all asset classes and establish peace throughout the Seven Kingdoms.

Or, I just need a break from Game of Thrones.

Last week, the Nasdaq and S&P 500 added 0.22 percent and 0.20 percent last week, respectively. The Dow fell 0.14 percent. Financials’ 1.34 percent climb and Health Care’s 1.29 percent gain led all sectors. Internationally, Developed Markets jumped 0.81 percent while Emerging Markets slid 0.34 percent. Small Caps were up on the week as the Russell 2000 gained 0.98 percent. Kinda nice when you pull most of your revenue from the world’s best economy (domestic) as the Smalls typically do. The S&P 500 and Nasdaq sit within a whisper of record highs. The Dow is sitting 1.2 percent from its record level. Continue reading →

Yin and yang. All things serving as inseparable and contradictory opposites. Preserving the greater balance of the universe and symmetry in all things. Male and female. Dark and light. Old and Young. Q4 2018 and Q1 2019.

The last six months have represented an extraordinary cycle. A really bad quarter (Q4 ) followed by a really good quarter (Q1). Three other similar cycles have occurred since the financial crisis ended in 2009. In each case, the following quarter was also positive and better than average.

Especially positive given that the S&P 500 sits a mere one percent below last year’s all-time high.

Earnings season truly kicked off last week. JP Morgan, PNC, and Wells Fargo reported Friday. Citi and Goldman reported Monday. With the pace picking up this week. A slew of positive reports from the likes of UnitedHealth Group, BlackRock and Bank of America, among others, has elevated stock prices. Continue reading →