Theoretically, this is supposed to be impossible.
It can only end in tears.
When both stocks (SPY) and bonds (TLT) go up at the same time, it usually signals that a medium or long-term top in markets is coming.
This can’t go on forever. One or the other of the twin bull markets has to fail.
I vote for bonds.
There are many reasons for the ultra low level of global interest rates.
You can blame quantitative easing in Japan and Europe. You can pin it on the $4 trillion Fed balance sheet, a hangover from US QE.
There is a global cash glut, and specifically a global corporate profit glut.
Companies around the world are making buckets of money, and it has nowhere else to go but the bond markets.
The concentration of wealth at the top, which has vastly accelerated over the past six months, is also a willing co-conspirator.
At the end of the day, you really only have to look at one number, and that is the 15% profit growth we saw in Q1 earnings.
As long as earnings are increasing, stocks go up. Period. End of story.
That means it is only a matter of time before bonds go down again.
When markets figure this out, fixed income securities of every kind will be looking down into a deep, dark abyss.
Sure, we are way, way overdue for a summer stock market correction. The concentration in the FANG stocks is downright hair-raising.
But any selloff in stocks we get will be temporary, and most institutional investors are more than willing to look through that to the next leg up, even if it’s for 4-6 months.
Sell your stocks, and it is really hard to get them back, like the NVIDIA (NVDA) I sold at $120, the Apple (AAPL) I unloaded at $132, and the Amazon I cashed in on at $700.
I could go on.
Making life miserable for traders is the fact that my Market Timing Index has been stuck in the 40’s and 50’s for over a month now. Not too hot, not too cold.
That means there have only been marginal trades at best available to the nimble, and that you’d be better off sitting on cash and reading research.
As much as I hate to say it, the indexers, closet or otherwise, have been killing it.
At least until now.
Further flummoxing traders was the May Nonfarm Payroll Report which came in at a feeble and disappointing 138,000, short of some estimates by as low as 100,000.
The headline unemployment rate dropped to a new decade low of 4.3%, a 16 year low.
The March and April reports were revised down by a stunning 66,000.
Business Services were up by +38,000, Health Care by +24,000, and Food Services and Restaurants by +30,000.
Government lost -9,000 jobs, while beleaguered Retailers pared back another -6,000.
The U-6 Long Term structural “discouraged worker” unemployment rates fell to a new decade low at 8.4%.
It is going to be a dreadfully slow week on the data front.
On Monday, June 5, at 9:45 AM, the first report of the week is the PMI Services Index, a survey of over 400 companies Nationally. It should be positive, as have all such opinion based data sets been recently.
On Tuesday, June 6 at 8:30 AM EST, we receive the JOLTS for April, which should be very healthy.
On Wednesday, June 7, at 10:30 AM EST the weekly EIA Petroleum Status Report is out, probably with dreadful news.
Thursday, June 8, at 8:30 AM learn the Weekly Jobless Claims. Last week’s number was essentially unchanged close to a 43 year low.
At the same time we also get the May Philadelphia Fed Business Outlook Survey.
On Friday, June 9 wrapping up the week at 1:00 PM is the Baker-Hughes Rig Count, which has been up for most of the last year, boding ill for oil prices. Last week saw a doubling of year earlier rig numbers, and 18 straight weeks of rises.
As for me, I will spend the weekend looking for vacation packages to Nicaragua and Syria.
I want to see what else our country has in common with these two nations beyond refusal to join the Paris Climate Treaty.
Good luck and good trading!
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