The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Fresh highs.
I guess the bulls were waiting for the inflation data. Futures were flat until CPI (2.7% vs 2.8% est & 2.7% prior). Under-the-hood details were also nice. Futures jumped up and yields jumped down. The S&P 500 opened about +30 and took an hour to bounce around, climbing steadily thereafter. Fed Funds futures moved in response to the CPI data as well. A rate cut on September 17 is now priced with 96% certainty. Total cuts for 2025 are 61 bips. Capital flow was a little higher today, 102%.
While the actual inflation data isn’t amazing, it is good enough to give the all-clear signal to stock investors. Apparently, would-be longs needed CPI assurance to put their capital to work. The Mag 7 led the way but the rally was broad too. Every sector climbed, with Communication Services and Information Technology leading.
With a potential stumbling block behind us, what’s the future hold for the stock market? Honestly, things look rosy. The chart is telling everyone, except the contrarians, to get long and stay strong. Fundamentals are positive and healthy. The fresh new all-time highs *confirm* the bullish trend for all the technicians. Psychologically, the new highs reinforce upside conviction in the market. Doubters and wait-and-see-ers, who wondered if the top was in, now have to come to Jesus.
The water looks warm, the returns are growing, the S&P is up 9.5% year to date. We’re almost at the double-digit gains that investors expect from annual returns in a bull market. If you don’t have 9% YTD yet, you have to hop on the bandwagon. Time is running out. Today may have been the final straw for any professional money managers that were underweight.
Obviously, the future can burn anyone and everyone. For the moment, capital has to flow into US stocks. The underperforming managers are going to lose capital to the outperformers, *if they don’t catch up.*
This means beta-chasing. This means winners are going to get even more attention. This means trends will extend.
See you tomorrow.
-Mike
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