Trump’s Appeal To A Plurality Of Black Voters Offers More Juice For The Bull Market: The Action For March 13, 2024
Trump’s appeal to Black voters discomfits the Times this morning in every way, from taking linguistic offense to being forced to offer puerile explanations of Black psychology. The central issue that the large plurality of Blacks have long had to rely on insipid public services and the American Left’s comical incompetence at improving these public services leaves little imprint on the journalists. What Trump offers is bumptious self-affirmation and a rejection of complex answers to complex problems, resetting the tenor of politics toward a first things first mentality, in the hopes that the negative aspects of public services will be replaced by simple common sense. The fact that such thinking offers no actual solution doesn’t bother Trump supporters any more than it does the bulls on Global Wall Street, since there is nothing to lose given the unfitness of public services to handle America’s problems. The simplistic mantra of looking out for number #1 has re-entered the culture and that suits this bull market just fine.
The bulls have control for the moment as several indicators reveal confidence in corporate earnings and the macro environment. These include:
Volatility Risk Premium: The VRP signals significant upside in the near term as the VIX has declined relative to actual volatility.S&P 500 Technicals: The top 40 in the S&P 500 look set to move the market higher.
MOVE Index Of Bond Volatility: Fixed income volatility is steady and implies modest inflation expectations and stable interest rates to come, potentially bullish for equities and the global economy.
High Yield Credit Spreads: The cost of borrowing is falling for lower-rated firms compared to their AAA siblings, a confident signal of an improving economy.
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.
Zinc Prices: Few commodities are as broadly important as zinc, and rising prices for zinc signal better than expected global demand, which is usually good for equities.
Copper Prices: Copper makes the energy transition happen but is also a barometer of global growth, and rising prices signal growth may be better than expected.
Tin Prices: Tin is broadly used across goods and industry and rising prices typically signal better growth prospects.
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 some risks the bulls need to climb over, including:
Short-Term Treasury Rates: Short rates are rising, a portent of higher inflation and/or Fed rate hikes, potentially bearish for equities.
Long-Term Treasury Rates: Long rates are rising and that will reduce the attraction of equities while cooling the housing and auto industries to the detriment of economic growth.
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.
Geopolitical Issues: Developments around Eurasia are a clear negative for equities.
This morning I added to my position in the levered ETF UPRO, consequently my current positions include 3M (MMM), Pfizer (PFE), a large position in UPRO and a smaller position in SPXU, which nets out to a bullish position in equities.