equity market

“Can you say: Balanced budget?”

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Optimism is rising for two main reasons: The U.S. economy and markets are going to continue to improve because Trump’s pro-growth, America-First administrative agenda – which will include tax cuts, deregulation, decreased trade deficits, and, most importantly, reduced government spending – promises to be extremely effective. Investors know it. Confidence has skyrocketed on the part of corporate executives, small businesses, households, students, and… even farmers.

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“The greatest threat facing humanity is a radical Islamist regime meeting up with nuclear weapons.”

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The S&P 500 traded to yet another all-time high last week: $5,878. The benchmark closed Friday at $5,865, up 0.9% on the week, while the Dow rose 1%, and the NASDAQ was up 0.8%. The U.S. equity market performance marked the 6th straight week of gains––the longest winning streak of the year.
This should surprise no one. This is an unsurpassed, debt-fueled, inflationary growth cycle.
Gold, too, is at another all-time high ($2,749.)
70% of S&P 500 companies reported earnings, and 75% beat expectations, which (truthfully) were marked down over the last month––so, essentially, coming in close to expectations (+6%).
Treasury yields continue to climb and have done so since Powell cut the Fed funds rate on September 18th. This confirms that the financial system, the economy, and markets do not require more stimulus at a time when debt and deficits, along with robust consumer spending and a growing labor force, are providing ample liquidity. 10y Treasuries were bought at 3.595% the day before (3.595%) and have risen to 4.217%. That’s a yield increase of +0.62%.

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“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”

Newsletter /

Economic data continues to surprise to the upside; the Citi surprise index was up again from last week (44.10 vs 39.0) and the January lows (0). It is above pre-pandemic levels, and the labor market is stronger, too. Unemployment is 3.7%, with claims falling and the number of available jobs rising.

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“Everything we see hides another thing; we always want to see what is hidden…”

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An old axiom in finance posits that averages hide more than they reveal. It’s true and supported by history,
as is the view that consensus forecasts will be wrong. The above quote (“Everything we see hides another
thing; we always want to see what is hidden by what we see.”), from the great Belgian artist Rene Magritte,
captures that axiom. Magritte’s art challenges the observer’s preconditioned perceptions of reality, as do
markets and large swaths of market strategy.

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