Market trends behave like Newton’s First Law— they maintain their direction and momentum until external economic forces intervene. Often, before reversing course, indices or stocks make a few final pushes in the same direction, forming reversal patterns. It has become increasingly evident that the major U.S. equity indices have finalized their topping patterns of the…
1) Are Inflation Expectations Anchoring? The tariffs are impacting the psyche, and people are reacting. Their inflation expectations are firming up, or as they say, the inflation expectations are anchoring. The 5-year Forward Inflation Expectations have been between 2.40% and 2.24% since November 2023. After declining from the high in April 2022, the University of…
Sell in May and Go Away is a popular stock market adage referring to its historical underperformance between May and October. However, during this period, too, the market is known to stage a rally that the Stock Trader’s Almanac calls the “summer rally,” albeit a short one and the weakest of all four seasons, within…
Ending the 2023 With A Bang By the end of 2022, the year-over-year change in the Personal Consumption Expenditure index was 5.9 percent and the Core PCE, the Fed’s preferred inflation gauge which excluded food and energy, inflated by 4.4 percent. The unemployment rate was 3.5 percent, and the real GDP growth was 2.6 percent.…
Ahead of the FOMC’s September 20, 2023 meeting, rate decisions, and subsequent press conference, various market indices are at critical junctures. The market is betting heavily on the Fed holding the rate at 5.50%, so the indecision shown by the indices is due to uncertainty about the larger picture. It is possible that the FOMC’s…
The S&P 500 is trending up since bottoming on October 13, 2022. It has cleared a few critical resistance levels and broken above bullish chart patterns since then. The probability is high that the upswing will go on for some time. Monthly Timeframe Fig 1. tells a good story of the S&P 500. The logarithmic…
“Bank on the trends, and don’t worry about the tremors. Keep your mind on long-term cycles and ignore the sporadic ups and downs …” — J. Paul Getty (as said to him by a successful financier)[1]J. Paul Getty, How To Be Rich Secular markets or secular cycles in an asset class are driven by strong…
On Wednesday, July 27, 2022, the FOMC raised the Fed Funds rate for the fourth time this year. The next day, the Bureau of Economic Analysis (BEA) announced that the 2022 Second Quarter GDP declined by 0.9%. Finally, to close out the week, the BEA reported that the Core PCE rose by 4.8% from a…
The market technicals, economic data, and historical comparisons are making a strong case that peak inflation, recession, treasury yields top, and equity bottom are around the corner. The New York Times says the word of the year is ‘uncertainty.’ In a conference call with investors, the Google executives said the word or its variations 13…
The current bull market, which started in March 2020, is beginning another leg up, but the market leadership has changed slightly. The discretionary sectors are now doing better than the defensive sectors. Small caps and transports are getting to the market leadership position. It behooves to change the portfolio mix, and it is time to get overweight on the leading sectors and underweight on the lagging sectors.
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