Something Is Ridiculously Wrong
Does This Sound Like A Risk-On Market To You?
The market’s been operating on a background of slowing growth, rising inflation and potentially the start of a weakening in the labor market. We got more evidence this past week that conditions may be getting worse. Initial jobless claims surged way above expectations and posted their highest weekly number since August 2023. Consumer sentiment also plunged way below expectations and hit its lowest level since November 2023. The latter number isn’t a big market mover on its own and the former number can fluctuate on a week-to-week basis, but they are adding to this portfolio of economic data that shows that the slowdown is real and it may be broadening.
Equity investors didn’t seem to care a great deal, pushing the S&P 500 higher by another 1.9%. It’s the composition of this move, however, that’s important. What was the best performing sector of the week? Again, it was utilities gaining more than 4%. Consumer staples and healthcare, two other defensive sectors, also outperformed the broader market. Gold was up 2.7%. Long-term Treasuries posted a modest gain. The dollar was up again. Does this sound like a risk-on market to you? When the most significant markers of bearish sentiment are posting the biggest gains and have been for several weeks? I talked just this week on Twitter/X about how the bears are still in control here. Most people won’t believe it, but this is exactly what I’m talking about. When utilities and gold are leading the market (and not just by a small margin), it’s an indication that something is wrong.
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