Throwing Caution to the Wind (It’s Still Working!)

Animal spirits and complacency still run rampant in the equity market

Highlights

• Animal spirits and complacency still run rampant in the equity market

• Auto inventory seasonality issues were the biggest CPI surprise

• Falling oil demand forecasts fail to confirm a global economic acceleration

• Excess economic capacity means the BoC must get rates below “neutral”

Key Takeaways

Nasdaq Crosses 20,000

• Well, Bob Farrell’s Rule #4 remained intact yesterday, with the Nasdaq Composite crossing above the 20,000 mark for the first time. That rule, of course, posits that exponentially rising (and falling) markets go further than we think, but don’t correct by going sideways.

Broad Equity Market Strength is Fading

• The equal-weight S&P 500 index failed to make a higher high. So, the 8-day streak of lower highs is confirmed. That's only the third time since May-June 2019 that has happened (the last time was September 2022). Not to mention that the cap-weighted S&P 500 was threatening to make an all-time closing high before the final hour fade. Quite a contrast.