The GOP Is Struck With Trumpery Instead Of An Easy Win This Election Year, And The Markets Won’t Like That: The Action For March 5, 2024
The Times takes stock of the Presidential Election this morning and struggles to avoid the smug realization that Biden is likely to win precisely because the GOP has lost every opportunity to provide a strong alternative to Trump. Even the liberal justices on the Supreme Court have sabotaged the GOP in allowing Trump to race unimpeded to the nomination. While I share the Times’ conclusion the prospect of four more years of Trumpist economics and Biden’s ineffectual and incoherent foreign policies provides a strong case to discount the future heavily rather than lightly. As such I expect the S&P 500 likely rises over the near term but falls sharply numerous times over the course of this desultory election year.
The bears have control this morning despite no unexpected news, and this makes the downturn likely a temporary back and fill on the way to new highs. Several indicators reveal confidence in corporate earnings and the macro environment, including:
S&P 500 Technicals: The top 40 in the S&P 500 look set to move the market higher.
Shanghai Composite Technicals: Chinese equities are trading well and that bodes well for 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.
Liquidity Metrics: Measures of money flow across the globe are trending upwards lately, which helps 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.