When the going gets tough, the tough get going, but not when the economy is slowing. That’s what the data is telling us and not surprisingly some investors headed for the exits last week. The S&P 500 now sits precariously close to the trend line that started in October 2022. That puts things in perspective and what’s losing a few percent when you have made more than 50% in two years?
Ironically, we cheered bad economic data back then because it meant that rate cuts were finally coming. Now, we are scared of what we wished for, so what are we to make of the worst start to the month for equities, since ahem, last month? As bond investors, not much and long may the gains continue. Inflation has certainly come down and with ten-year treasury yields now at 3.7% the outlook looks rosy.
That has also given property stocks a boost and anything that’s rate sensitive such as utilities with both sectors holding on to most of the recent gains. Value stocks also found a bid as foretold by the one who thinks Liverpool will win the Premier League and the Dallas Cowboys will win the Super Bowl, so long as the Claygate Royals Hawks U11 Girls football team can score a goal in their inaugural season.
The only thing that makes me cry if I want to, would be a break in the S&P500 below 5300. Then we may be looking at a index level that starts with a four before we find any sort of technical support. What should we do in this extraordinary period of uncertainty and market volatility? Easy, whatever Nancy Pelosi does. She sold Nvidia a day before the Justice Department launched its investigation and sent the stock 20% lower. Some people just have all the luck.
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