Biden Survives The Day And Disinflation Determines His Future: The Action For February 29, 2024
The Times notes Biden’s trump card and his challenge in its dissection of the Michigan primary, which likely offset one another and make this race close. While progressives won’t veer toward Trump’s GOP they may rival the small plurality of Republicans who sit out the election out of disgust for their Party. That means the economy is likely to determine how swing voters swing, and should disinflation continue as it appears in this morning’s data then equities should power a wealth effect that makes the swing voter sanguine about electing Uncle Joe. I see the bull trend cracking soon, as irrational exuberance over future productivity takes a temporary backseat to declining liquidity. And the sooner the correction happens the better for Biden’s chances in the Fall.
The bulls have control for the moment as several indicators reveal confidence in corporate earnings and the macro environment. These include:
S&P 500 Technicals: The top 40 in the S&P 500 look set to move the market higher.
BTP-Bund Spread Of Italian & German Bonds: Italian default risk and a corresponding crisis for the Euro are muted, which is critical for European stability and is good for global growth.
Economic Data: The latest economic data regarding disinflation is as expected, a positive sign for equities
Liquidity Metrics: Measures of money flow across the globe are trending upwards lately, which helps equities.
Based on the action yesterday and overnight there are hardly any risks the bulls need to climb over, the only one being geopolitical Issues, where developments around Eurasia are a clear negative for equities.
My current positions include 3M (MMM), Pfizer (PFE), a large position in UPRO and a smaller position in SPXU, which nets out to a long position in equities.