The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Moody
Futures began dropping before midnight and implied 40-50 points of downside by the time the market opened. The Treasury curve initially reflected higher rates again, which was a bearish influence for stocks. However over the course of the morning, yields ended up falling. This should have been a welcome development for stock bulls, but it wasn’t. The S&P 500 quietly bumped along throughout the session, down 35 to 50 points, depending. News was quiet again and the decline in US equities doesn’t appear rooted in a particular story but a change of sentiment. Capital flow remains light at 87% but is higher than the last few sessions.
US stocks are obviously not trading tick-for-tick with US Treasuries. It appears though, that the stock market has wilted in spirit. It also appears that the higher rates environment is contributing to the unenthusiastic action in the stock market.
Stock market moods can change quickly too however. It is highly likely that should yields fall consistently across the curve over a few sessions, the stock market will catch some strong bids. That is widely understood.
It is plausible, though not consensus, that all the stock market needs is for rates to tread water, so that the pendulum of sentiment can swing back towards optimism and enthusiasm. The fundamentals of US stocks are good. That fact will influence stock investors over time. High projections for earnings growth will eventually attract stock buyers and spur upside.
In the absence of negative pressures, it’s a matter of when and not if.
But higher rates have been a negative pressure. The near-term question is whether a rates pause is all the stock market needs or does it need significant rate declines.
See you tomorrow.
-Mike
Visdom Market Commentary
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