Don’t Short Bubbles

But don’t own them either

Highlights

• The S&P 500 is off to its second-best start to any year over the past decade

• But sentiment is stretched, breadth is poor, and valuations are lofty

• Is Nvidia a bubble or not?

• Forget China, Korea is the next Asian turnaround story

While We Were Sleeping

It is a rarity to be seeing the global equity market on its back foot, but that is how we are starting off the day and week.

U.S. futures are somewhat in the red column, as breadth measures hit their worst levels since 2009 (see right below)! The +6.7% year-to-date gain in the S&P 500 is the second-best start to any year over the past decade (surpassed only by this same time in 2019, when the index was up +11%) — one-quarter of the run-up being concentrated in one mega cap Tech giant (you guessed it — Nvidia, which tacked on $277 billion in market cap last week, and where bullish call option trading has now topped Tesla, Meta, Microsoft, Apple and Amazon combined! The majority of these are trading between $800 and $850 versus Friday’s closing price of $788).

European stock markets are off -0.2% thus far in the overnight trade, weighed down by the mining stocks (with metal prices peeling back nearly -2% so far today).

Outside of Japan’s Nikkei 225 (+0.4%), it was a rough session in Asia (see Buffett Made Billions From Bets On Rallying Japanese Stocks on page B1 of today’s WSJ) — China’s Shanghai Composite (-0.9%), Korea (-0.8%), Hong Kong (-0.5%), India (-0.5%), and Singapore (-0.5%). China’s lagged performance mirrored the -3.6% slump in the price of iron ore overnight (after being down an eye-popping -9% last week — to a four-month low!).