The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Rejuvenation.
Futures faded small last night but caught a bit of a bid into the open and the S&P 500 opened slightly positive. The index ramped quickly during regular trading and was +45 within an hour, climbing slowly further over the rest of the session. The big story of the day concerns the investment announcements and defense purchase announcement with Saudi Arabia. Stocks used the news as a reason to continue the upside momentum and forecast a rosy economic outlook. Bonds didn’t do too much but slightly higher yields could been interpreted as corroborating the economy-will-strengthen narrative. Fed funds markets now price 52 bips of cuts for 2025, so that market also is less and less worried about the health of the economy. Capital flow was slightly elevated at 115%, suggesting the large pools of capital are going into motion.
The Saudi Arabia deal has been labeled, by the President, as a trillion-dollar deal, although the numbers posted at the conference itself say $300 billion and the White House says $600 billion. Obviously the President sells the sizzle and not the steak and who knows how much money Saudi Arabia actually spends/invests. By the time we actually know, it’ll be years from now and this announcement is more public relations, or investor relations, than anything else. We’ve been in a sentiment market for a while and this is the latest sentiment-driving news story. For investors, who cares how much of it is true? The mood was good and now the mood is cheerful.
Stocks are going up significantly and consistently and lots of capital is getting into motion. That’s a recipe for a trend and so there are a lot of investors getting long with gusto now, assuming that slower capital will eventually read the room and get going on the long side in the coming weeks. Barring a bombshell news story, it seems that we are on a path to new highs. That’s only 4.4% away. We could be there by the end of the week, certainly by month-end.
*If* we do return to the old highs, and make new ones, the market will confidently proclaim that the bull market never left us and we should all return to our behaviors from 2023 and 2024.
I can’t argue with that thinking either. I may argue that the valuations don’t justify that outcome but when the market perceives that we’re in a healthy bull market, valuations don’t matter and upside is the only side.
See you tomorrow.
-Mike
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