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S&P 500 continued on my bullish path called, market breadth further broadened in desirably healthy ways, and for all the macro (political) and fundamental shifts (it‘s not just about AI and datacenters initiatives, and electricity infrastructure – think also the energy mix and how I had been talking the return of nuclear (MSFT deal in autumn is an example), and natural gas is shaping up as transition fuel thanks to its reliability and availability in the States. Way more details premium below.
What‘s important is that the comeback from Dec FOMC selloff is nicely progressing, and S&P 500 keeps leading as it should (already above that Wednesday selloff level), and Russell 2000 is not too far behind Nasdaq in that aspect. Simply put, it‘s still about financials and much touted industrials finally reflecting USD strength, with more nuances covered below. Check out today‘s practical video!
Yesterday‘s excerpt from yesterday‘s extensive analysis is echoed today as well:
(…) Another risk-on factor is the rise of Bitcoin and other cryptos (incl. MSTR slowly picking up speed) – of course before the Trump or Melania coin. S&P 500 with precious metals trading on European markets Monday (pay attention to bond yields retreat sending USD a bit lower) confirm the risk-on positioning and optimistic expectations from the new admin hitting the ground running. Gold is also pushing higher, and Friday was merely a daily pause in a very much unfinished grind higher, which is still very orderly – and as said, continuing early in the week.
Of course the key market to watch, are bonds – today‘s video asks will the rise in yields continue, and why exactly are yields moving higher? Have you reviewed already Saturday‘s extensive video covering so much ground beyond this question – do so please as I dive into many assets!
In earlier weeks, I wrote about upcoming real economy acceleration (manufacturing is way smaller part of the economy than services), slow improvement in productivity, deregulation driving corporate profits later in the year and as well about sticky inflation morphing into increasing inflation expectations (so far not unanchored) as drivers of the ascent in yields. Forget not about the national debt situation, fiscal deficits with or without considering the defence budget share.
Add the Fed‘s latest series of cuts, which ever since the 50bp panicky Sep start has led to what I called for it to lead – to the counterintuitive rise in yields. Such are the seeds of bond market revolt as these are perceived to light up in inflationary fires down the road – and that‘s what we‘re likely to see by end of Q2 2025. Having power to force the Fed to back off balance sheet shrinking, the bond vigilantes may make it come back as a buyer (yield curve control coming later? Remains to be seen).
Hence back in early autumn, I called for 10y yield to surpass 5% with ease – we‘re slowly getting there.
For now, the pace of yields ascent will slow down, yet 10y above 5% – 5.25% represents the clearest correction risk to S&P 500, but we aren‘t yet there in the least.
Today‘s I‘m bringing you precious metals and crude oil analyses that Trading Signals are getting with extra coverage – note how these too line up with the current risk-on moves in equities and crypto ahead of greater inflation-expectations-induced moves in real assets (except for gold, but I been on its path higher just fine lately for you).
Gold, Silver and Miners
Gold is leading and silver is consolidating, I‘m looking for continued yellow metal leadership in the slow grind higher provided that bond yields don‘t jump quickly to the upside soon (they won‘t this week) – fresh upleg is well underway, and the set of lower knots as downside rejections, are meaningful.
Crude Oil
Oil is vulnerable to a downswing below $76, but I don‘t think it‘s on the menu today – sideways day reflecting indecision about prices in the near term, but the sellers are to win in the weeks ahead.