Like The Bulls On Wall Street Trump Resurrects Not The Eisenhower 50s But The Harding 20s: The Action For May 10, 2024

The clarion call to buy in May as if the equity market had hit a permanent plateau is the talk of Wall Street this week just as Trump’s open solicitation of bribery is the talk of DC and the Times front page this morning. For both the investing public and voting public the results will be the same, as investors passively buy the market no matter the valuation and Trump supporters remain loyal despite the clear extension of the swamp. The S&P 500 likely rises over the near term, as investors bet either Trump tax cuts or Biden spending largesse continues no matter who wins, setting up a win-win summer.

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.

  • 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.

  • Inflation Expectations: Investors expect lower inflation over the coming years, implying lower interest rates to come, potentially bullish for equities.

  • Copper Prices: Copper makes the energy transition happen but and teh is also a barometer of global growth, and rising prices signal growth may be better than expected.

Based on the action yesterday and overnight there are some risks the bulls need to climb over, including:

  • 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.

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

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

Yesterday I added a new position in the levered ETF UPRO to offset some of my short position in the inverse levered ETF SPXU, consequently my current positions include 3M (MMM and its spinoff SOLV), Pfizer (PFE), a moderate position in UPRO and a larger position in SPXU, which nets out to a modest short position in equities.

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