Tuesday, March 22, 2022

Morning Note: No Big Mystery

The action in equities of late has been nothing short of fascinating, not mysterious mind you, but fascinating.

Fascinating in the sense that arguably the chief reason for what has been a historic bull market in stocks (I take this one back to 2009 [no, 2020's swoon does not qualify as a bear market in my book]) -- the US Central Bank's equity market centricity all that time -- has, well, at least ostensibly, flipped on its head. 

I.e., clearly, if you believe what J. Powell and company are saying, they're willing to allow markets to fall, and, frankly, the economy to falter as they rise to the inflation occasion. And, yet, stocks are hanging in there with what presently amount to merely mid-single digit declines off of recent all-time highs. 

Now, there's this old Wall Street adage that says stocks tend to "climb a wall of worry." And, yes, our observation is indeed that there's some truth there. So much so that we designed our own "fear/greed barometer" to assess the overall level of worry signaled within 10 separate metrics. As of last weekend our barometer scored +20, which signals that there's a bit of worry prevailing in the present market setup.

Theory has it that when there's net worry there's net cash in the hands of would-be investors in stocks that they'll allocate accordingly when their worry abates. Therefore, as the object of their anxiety grows whiskers (the seemingly ominous development persists but fails to crash the system), or begins to abate, that net cash trickles in, pushing share prices ever higher as stubborn sellers -- inspired by the same dynamics -- demand ever higher proceeds.

And, yes, there's plenty to worry about, and, yes, in our view equities are holding up in anticipation of some alleviation/resolution in the not-too-distant future. Of course if it doesn't come, and conditions worsen over the next few months, we'll be having a wholly different conversation. If/when it does, well, then I'd expect a monster minute-long rally, then a waking up to the fact that the Fed actually means it, and, until stocks suffer something that, let's say, would actually merit the word "suffer", well, like I said in our 5-minute weekend video update, "this market has some serious headwinds going forward."

Asian equities rallied overnight, with 11 of the 16 markets we track closing higher.

Europe's catching a notable bid as I type this morning, with all but 1 of the 19 bourses we follow in the green.

US major averages are up (although, by sector [staples, utilities, healthcare and energy are down] things are mixed) to start the session: Dow up 264 points (0.76%), SP500 up 1.04%, SP500 Equal Weight up 0.83%, Nasdaq 100 up 1.67%, Nasdaq Comp up 1.69%, Russell 2000 up 1.21%.

The VIX sits at 22.81, down 3.06%.

Oil futures are down 1.75%, gold's down 1.12%, silver's down 2.17%, copper futures are up 0.05% and the ag complex (DBA) is up 0.09%.

The 10-year treasury is down (yield up) and the dollar is down 0.11%.

Among our 37 core positions (excluding cash and short-term bond ETF), 30 -- led by ALB (lithium miner), financial stocks, PARA (formerly Viacom), solar stocks and Disney -- are in the green so far this morning. The losers are being led lower by silver, gold, energy stocks, uranium miners and base metals miners.

Desperate for a quote this morning 😎:
"...macroeconomics is not nearly as complicated as many would have us believe. You and I just need to do a little more outside-the-box thinking and a little more seeing of the unseen."
--Mazorra, Martin. Leaving Liberty?: Essays on Politics and Free-Market Thinking

Have a great day!


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