The market knows only one direction: up, up, and away! The good news is it moved higher with these stalwart sectors acting like lead balloons. This is the kind of action that makes me excited.

One must go back into the last century to find the last time the S&P 500 was up 13 out of 14 weeks.

The Lift & Hot Air

The rally began in late October with the Powell victory lap, and three Fed rate cuts were announced. The Street instantly assumed that meant seven Fed rate cuts. That lifted the market higher. But now, there is a sobering reality that the Street was too optimistic. Yet, the rally continues. Hot air?

The Tide Goes Out

Yesterday’s session notwithstanding, the rally narrowed as more names lost momentum and drifted below their 50-day moving average.

Meanwhile, if we take the Gross Domestic Product (GDP) indicators at face value, they erupt higher and break away from the terminal federal funds rate.

Stuff is happening, and we are trying to connect the dots.

Today’s Session

It’s still upward momentum against the winds of changing opinions on the number of rate cuts and the true underlying health of the economy.

Aggregate data is not the US economy.  I’ll scream next time someone points to aggregated data to suggest the US households are in great shape. 

Tell that to the folks struggling to pay their credit card bills.

Meanwhile, there is a conundrum of short-term spurts higher in high frequency economic data that increase the likelihood inflation could reignite.

That’s not the ideal place to cut rates, right?

I think the best proxy for all of this is the ten-year treasury note.  If it gets over 4.20%, we could see an immediate reversal of sentiment.

That big bond bet of 2023 is still mostly under water.

There is a chance a secular bear market in bonds has begun.

 

 

 

 

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