Trump’s Rhetoric Is Pure Trumpery For The Bulls, Making A Nice Excuse To Take Profits: The Action For February 13, 2024

The Times this morning bemoans Trump’s latest rhetoric and the near ubiquity of craven replies from GOP stalwarts towards him, while markets respond to a slew of negative news and reveal fragility in the face of mild hints of persistent inflation. But most likely the literati and the bulls aren’t on the same page, and the negative consequences of a Trump 2nd term matter little while profit taking offers a nice escape from such considerations. The S&P 500 likely rises back over the near term, with a real correction still a few weeks off.

The bears have control for the moment as several indicators reveal pessimism on corporate earnings and the macro environment. These include:

  • Short-Term Treasury Rates: Short rates are rising, a portent of higher inflation and/or Fed rate hikes, potentially bearish for equities.

  • Economic Data: The latest economic data regarding inflation is worse than expected, a negative sign for equities

  • Quality Of Earnings Trend: Over the past few quarters the largest firms have generally experienced worsening credit terms, margins and inventories, signaling future profit stagnation or decline.

  • Developed Market FOREX / $US: The dollar is getting stronger against most major currencies (€, ¥ and Renmimbi) and that’s usually bad for global growth.

  • WTI Crude Prices: Oil and by extension gasoline is getting more expensive and that in itself hurts consumers and the global economy.

  • Geopolitical Issues: Developments around Eurasia are a clear negative for equities.

Based on the action yesterday and overnight there are several factors that likely flip the markets around, including:

  • Russell 2000 Technicals: Small stocks are breaking out and reflect surging confidence in economic growth.

  • Liquidity Metrics: Measures of money flow across the globe are trending upwards lately, which helps equities.

  • Tin Prices: Tin is broadly used across goods and industry and rising prices typically signal better growth prospects.

I am effectively neutral on the market, as my current positions include 3M (MMM), Pfizer (PFE), and a small position in UPRO and a larger position in SPXU, which nets out to a neutral position in equities.

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