The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
New all-time highs
The bulls went to work at the open and they kept the tape climbing throughout the day. Headlines continue to be jam-packed with geopolitical news but not much is upsetting equity markets. January FOMC cut probability held at 17%. The yield curve steepened small. Materials and health care were the leading sectors today. The Mag 7 was mixed again. Capital flow was 108%, a sign that investors have begun an equity-allocation process in earnest.
Is this the January effect? It sure feels like it. News has not been a catalyst. Flows have been steady and elevated. Rallies are modest and broad. The chasing of AI stocks or the Mag 7 is absent. The markets are gobbling up stocks en masse but without freneticism. If you’re a bull, you call this a healthy sign of a mid-cycle bull market. If you’re a bear, you call it delusional continuation.
Setting that debate aside, the behavior should be our focus. Will this behavior continue? If we avoid some shocking headlines, yes. The investing population is *increasing* their equity exposure. Whether you think they are smart or dumb doesn’t alter the fact that the crowd is in motion and unlikely to simply get tired of lifting offers.
If the upward trend is to change, some shift in the investing landscape must occur. In the near term, macroeconomic data fits the bill. Labor data, in the form of ADP employment, weekly jobless, and nonfarm payrolls, arrives Wednesday, Thursday, and Friday respectively. Narrative-altering surprises in the labor market could certainly help the equity bears. That is a low probability risk however.
For the rest of the week, the probabilities favor the longs. Next week may make things more of a 50/50 proposition.
Inflation data and the first reports of earnings season are next week items. The potential for curveballs is higher then.
I think things look good for the bulls but if a bump in the road lies ahead, it’s probably not this week.
See you tomorrow.
-Mike
Visdom Market Commentary
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