The Democrats Serve Up Corruption And Trivialities To Match The GOP This Election Year, Dampening Even The Bulls’ Enthusiasm: The Action For March 22, 2024
The Times dutifully covers the disgrace of Democratic Senator Menendez this morning but then does its bit to further stifle support for Democrats by highlighting the preposterous rationale given for the Biden Administration’s suit against Apple. Few if any would actually benefit from the suit while millions who rely on Apple can only question why such trivialities as the rules of the App Store should command front page news let alone the interest of an overworked Administration. Such a misstep also marks the rare confluence of political pessimism with market pessimism, as the suit promises to add uncertainty to the market now that the second most valued firm is in the crosshairs of nearly every major government in the world. Given the huge runup of late the Apple story just adds one more reason for traders to take profits and keep the S&P 500 from making a new high today.
The bears have control for the moment as a few indicators reveal pessimism on corporate earnings and the macro environment. These include:
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.
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 next week, including:
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.
Yesterday afternoon I sold a portion of my holdings in the levered ETF UPRO ahead of the weekend, consequently my current positions include 3M (MMM), Pfizer (PFE), a moderate position in UPRO and a smaller position in SPXU, which nets out to a modestly bullish position in equities.