The thing I emphasized in the ChartStorm was the Changing Tides… consider the following data points and observations:
Wall Street analyst Earnings expectations are rolling over from ebullient levels (see today’s chart).
Investor Sentiment is rolling over from record highs (e.g. Euphoriameter).
Consumer Confidence in the Stockmarket is likewise slumping from a record high back in November.
Investor portfolio allocations to stocks are peaking at record high levels.
Margin Debt expansion has peaked and rolled over from warning levels.
Valuations are moving lower from previous extreme expensive levels (and are still a long way from becoming cheap).
The stock/bond ratio is rolling over from stretched levels (and a very low forward-looking equity risk premium); likewise bond yields are rolling over from the peak (+unemployment rate is turning up off the lows).
And credit spreads are starting to trend up (from 17-year lows).
Then also consider this background context: developed ex-US and emerging market equities have been through a long period of stagnation and underperformance (which is now changing) —along with a decadal run of strength in the US dollar which reinforced a 15-year run of outperformance by US vs Global equities…
In other words, for a while there in terms of global equities, all roads led to the USA (and with hindsight: for good reason, they had a golden decade and a half).
But along with various datapoints mentioned above, the US dollar and US vs global stocks relative performance is likewise turning the corner.
The key point is it’s all internally consistent… The big picture prognosis is the tides are changing. It all has a look and feel of your traditional market cycle peaking and then rolling over — which is the worst time to hold risk assets from a market timing and risk management standpoint (and the best time to lean into defensives and diversifiers from an asset allocation perspective).
So whether we get this tariff or that tariff, whether this geopolitical thing happens or that fiscal contraction occurs, or whichever confidence shock and uncertainty comes… the main issue is the market cycle and the mounting body of evidence which all says the cycle has moved from boomtown toward bust.
$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2506(ESmain)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$
Key point: Zooming out, the big picture is that the market cycle is turning down.
Hedge Funds have de-risked at a record pace over the last 2 months.
This continued last week with the largest net selling in Tech in 6 months and 2nd largest in the past 5 yrs.
$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ $iShares Russell 2000 ETF(IWM)$ $Tesla Motors(TSLA)$ $NVIDIA(NVDA)$
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This is a stark contrast to retail, who bought the dip throughout Q1 👇👇
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