Corporations predominately borrow from banks and credit investors via the corporate debt markets. Most often, banks and credit investors have similar views as to pricing corporate loans/debt. Today, their views are starkly different. The graph below compares bank lending standards to the yield premium of junk bonds versus U.S. Treasury securities. As shown, spikes in […]
Houthi rebels are attacking Red Sea vessels and greatly limiting traffic in one of the world’s most critical shipping lanes. Four of the world’s five largest container shipping companies, accounting for slightly over half of the world’s container traffic, have suspended transit through the Red Sea. As the graphic below shows, the alternative route, around […]
In Tuesday’s Commentary, we shared four indicators of market breadth. While they all show robust breadth was driving markets higher, they also point to high levels of overboughtness. We stumbled across the following analysis from Sentimentrader, which further confirms the market is temporarily overly optimistic, overbought, and due for a correction. The graph below shows […]
Per a Bloomberg article entitled World’s Biggest ETF See Record $21 Billion Flow on Stock Rally, the ETF SPY saw a massive $20+ billion inflow of funds last Friday. Interestingly, the Nasdaq 100 (QQQ) had a record $5.2 billion outflow. At the same time, the equal-weighted S&P 500 (RSP) saw inflows of $2.1 billion last […]
The S&P 500 is only 2% below record highs set two years ago. It appears highly likely the index will set new record highs in the next week or so. The bigger question is what comes after that. While the Fed’s policy stance, economic data, and coming Q4 earnings will help form expectations, let’s focus […]
The VIX index, measuring the implied volatility of the S&P 500, is now at its lowest level since the pandemic started. Some bears warn that the very low VIX forewarns of trouble ahead. In one sense, they are correct. A spike in the VIX from very low levels, as we have today, ultimately precedes steep […]
Following Wednesday’s Fed meeting, ZeroHedge aptly titled an article, “Santa Powell Unleashes Global ‘Buy Everything” Frenzy As Dollar, Yield Tumble.” Stocks and Bonds surged higher as the Fed was much more dovish than expected. Like Paavolov’s dogs, investors latched onto the prospect of rate cuts in 2024 and bought stocks and bonds without asking essential […]
The Fed’s pause since the last rate increase is five months old. To help appreciate the tightrope the Fed walks between recession and inflation, we closely follow Fed communications and appreciate history. At yesterday’s FOMC meeting, Jerome Powell used the balance of risks between inflation and recession as the justification for the pause of rate […]
The Nasdaq rebalanced its holdings as expected yesterday. However, investors were not expecting the NASDAQ to reduce the contributions of the Magnificent 7 (AAPL, MSFT, TSLA, GOOG, NVDA, AMZN, and META) and, in the aggregate, raise the contribution of the remaining 93 stocks. The heat map below shows that each Magnificent 7 stock was red. […]