The big story in January was the dramatic resurgence of investors’ “animal spirits” following the Federal Reserve’s apparent policy pivot last month. This shift ushered in the fastest easing of financial conditions on record (from BofA Global Research/Barchart via X)… Posted onSunday, January 28, 2024Thursday, August 29, 2024AuthorPorter & Co.
Surveys show professional investors are once again extremely bullish, with sentiment surpassing even the peak of the previous bull market in 2021 (from Consensus/Jim Bianco via X)… Posted onSunday, January 28, 2024Thursday, August 29, 2024AuthorPorter & Co.
Data suggest Individual investors are even more bullish, with 80% of respondents expecting the broad market to end the year higher. By this measure, mom-and-pop investors are more bullish than they’ve been anytime since March 2007, nearly a year before the Great Financial Crisis began (from Yale School of Management via Yahoo Finance)… Posted onSunday, January 28, 2024Thursday, August 29, 2024AuthorPorter & Co.
Meanwhile, the CBOE Volatility Index (VIX) – the market’s “fear gauge” – has continued to fall. It is now trading at its lowest levels since before the COVID-19 crash – and near its lowest levels on record – suggesting investors are historically complacent today (from The Next Economy)… Posted onSunday, January 28, 2024Thursday, August 29, 2024AuthorPorter & Co.
This recent surge in bullish sentiment has coincided with similar shifts in market positioning. For example, “non-dealer” – i.e., all investors excluding market makers – long positions in market index futures has surged to all-time highs (from Daily Chartbook/Jesse Felder via X)… Posted onSunday, January 28, 2024Thursday, August 29, 2024AuthorPorter & Co.
The big story this month was the apparent policy “pivot” from the Federal Reserve. At its latest Federal Open Market Committee (FOMC) meeting on December 13, Fed officials signaled a likely end to its aggressive rate-hiking campaign and projected it would likely cut interest rates three times in 2024 (from The Wall Street Journal)… Posted onSunday, December 31, 2023Wednesday, January 3, 2024AuthorPorter & Co.
Futures markets quickly became even more “dovish” than the Fed, pricing in up to six interest rate cuts next year (From Jim Bianco via X)… Posted onSunday, December 31, 2023Wednesday, January 3, 2024AuthorPorter & Co.
Investors broadly cheered the news as positive for both the economy and risk assets. However, history suggests caution is warranted. Going back to at least the 1950s, Fed pivots have been highly correlated with rising unemployment (from The Kobeissi Letter via X)… Posted onSunday, December 31, 2023Wednesday, January 3, 2024AuthorPorter & Co.
Over the same period, Fed pivots have also generally been bearish for stocks over the intermediate term. This has been particularly true following aggressive cycles when inflation has been high, stock market valuations have been extreme, and corporate and consumer debt burdens have been elevated – all of which are true today (from Michael A. Gayed, CFA via X)… Posted onSunday, December 31, 2023Wednesday, January 3, 2024AuthorPorter & Co.
Meanwhile, this policy shift is occurring with headline consumer price inflation still well above the Fed’s official target, setting the stage for a sharp potential rebound like that which occurred in the late 1970s (from Torsten Slok via The Daily Spark)… Posted onSunday, December 31, 2023Wednesday, January 3, 2024AuthorPorter & Co.