Biden Bullies The Bigots On Both Sides Into Sense And Sensibility And Hopefully The Bulls Are Listening: The Action For May 8, 2024
Anti-semitism took a strong punch from the bully pulpit as President Biden forcefully condemned the filthy bigotry seen across colleges and increasingly high schools across the country. The Times not only documents Biden’s speech at the Holocaust Museum on its front page but also reports on the antics of teachers and students at Berkeley High School, who walked out of classes to protest the war in Gaza, employing chants written to belittle Israel. Neither story explains why the bigots who inhabit the left and the right share only one prejudice in common, namely anti-semitism. The reason is because no group has ever manifested the high intellectual skill of foresight like the Jewish people, a trait honed over millenia as a result of countless pogroms and tacit support from bigots everywhere. Foresight is the one intellectual skill that doesn’t require education and yet is the least pervasive among people. The elevated status of Jews in all professions and their outsized contributions to knowledge and beauty owes much to the emphasis on foresight in navigating a dynamic and unpredictable world.
Wall Street professionals take pride in employing foresight to act providentially, even when markets decline. The recent correction seems to bear this out as some bullish investors have ridden the bounce back to 5200 on the S&P. But the index likely falls over the near term, as I see investors living through the periodic resurgence of irrational exuberance, believing that fluctuating productivity will support margins and high interest rates won’t deter spending. As such high valuations it’s clear why many famed investors known for their foresight have cut exposures or are actively calling for a further correction.
The bears have control for the moment as several 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.
Aluminum Prices: Aluminium is a critical input for consumer and industrial goods and falling prices signal weak global demand, which is usually bad for equities.
Geopolitical Issues: Developments around Eurasia are a clear negative for equities.
But the market may bounce up and down from here until next Wednesday’s CPI report, as the action yesterday and overnight there are several factors that flip the markets around, including:
S&P 500 Technicals: The top 40 in the S&P 500 look set to move the market higher.
Russell 2000 Technicals: Small stocks are breaking out and reflect surging confidence in economic growth.
Inflation Expectations: Investors expect lower inflation over the coming years, implying lower interest rates to come, potentially bullish for equities.
Long-Term Treasury Rates: Long rates are falling and that will improve the attractiveness of equities while boosting the housing and auto industries to the benefit of economic growth.
WTI Crude Prices: Oil and by extension gasoline is getting cheaper and that in itself helps consumers and the global economy.
This morning I sold half of my recently added position in the inverse levered ETF SPXU, consequently my current positions include 3M (MMM and its spinoff SOLV), Pfizer (PFE), and a smaller but still moderate position in SPXU, which nets out to a moderate short position in equities.