Making Sense out of NonsenseSoooo...where are we?
1.....The market is in the excessive greed category
2....Chinese exports fell 7.5% YOY in may and imports fell by 4.5%. South Kores chip exports to China fell 36% in May suggesting a slowdown is coming in Chinese manufacturing.
3...Central Banks are signalling that more interest rates hikes are coming and the BOC raised rates today by a quarter of a point.
4....Biden stimulus package and trillion+ dollar deficit spending/stimulus is still intact following the debt ceiling deal with the Republicans
5...consumer debt is at record levels despite higher interest rates
6...oil prices remain below the Saudi all-in cost of $85 a barrel (Brent) despite a cut in production coming next month
7....unemployment rates are at full employment levels
When you put all this together it seems as though right now, the market is feasting on the trillions in stimulus that Biden can now spend and is ignoring all of the rest for now.
The question then becomes....for how long? Well nobody can really answer that one. But for sure, the canary in the coal mine are the numbers from China and the prospect of higher interest rates factoring into an economy where the consumer debt is already at record levels.
The problem with all this is that the market can turn on a dime with headlines like "Wall Street is concerned about interest rates hikes and the size of the US budgetary deficits". The excessive greed indicator suggests to me from experience that it is retail that is driving this and the pros while publicly saying that we might not see a recession are quietly on the other side selling into retail greed.
Shrewd investors are making sure they aren't holding the bag when the market flips.