By Peter Tchir of Academy Securities
I had to double and triple check my numbers today, because it seems so contrary to the narrative.
The S&P 500 was up less than 1% in May and futures indicate that could be eroding further today. I don’t follow the Dow at all, but it is down over 3%. Russell 2000 down a smidge. Yes, the Nasdaq is up and the Nasdaq 100 is up an impressive 8%, but when did the Nasdaq 100 completely replace the S&P 500 as the main benchmark of U.S. equities?
Does everyone really have to “performance” chase?
I’ve been -4 on a scale of -10 to 10 on equities for the month. Not my best month, but by no means the disaster I would think it has been if I just looked at the headlines.
The pressure to get long risk seems as high as I can remember in recent memory!
I’m staying at -4 (yes, like a broken record) on equities, though if anything, I’m getting more bearish.
Look for concerns about CRE, especially in major cities like San Francisco, LA, Chicago and even NYC to rise to the surface again. The abject fear that was prevalent in the market a month or so ago, was overdone, but there are risks and they haven’t gone away.
Neutral to maybe a tiny bit bearish on credit.
On rates, can we get back to -100 on 2’s vs 10’s?
While the Fed is data dependent, it will take a LOT of CONSISTENTLY weak data to put cuts on the table in a meaningful way. It wouldn’t take many higher than expected inflation prints to keep a potential June/July hike on the table, even if other parts of the economy are slowing.
10’s at 3.65% seem “cheap” if recession risks start showing up on the data, especially with a hawkish Fed. So I’m bullish treasuries as you move out the curve (call it a 4 on the -10 to 10 scale).
I’m concerned that recession risk is consensus (but consensus isn’t always wrong) and I’m worried that I’m underestimating the AI narrative, especially for the broader market, but feedback from the weekend piece has me leaning that too much good news is already priced in.
Back to the question that started this whole report. I understand why the bulls are somewhat happy, but the dancing in the street, giddiness, seems unwarranted, and makes me wonder if positioning doesn’t match the recession consensus calls?