Just as one Hurricane season ended (Carolina), a new one is starting (NOAA), JP Morgan’s Jamie Dimon had a stark warning to investors this morning about what potentially lies in store for them. Speaking at a conference, he warned “brace yourself” for the potential economic “hurricane” that could be coming as the Fed needs to undo years of support.
Ahh the Memorial Day Weekend sunburn… a time-honored tradition that painfully announces the unofficial start of summer. One would think that after several consecutive years of being taught a lesson by the late May sun, proper precautions would be taken; but alas, some lessons are harder-learned than others. Besides, everyone needs a “base tan” right?
Memorial Day Weekend beckoned, giving US indices one last boost to mark the unofficial start of summer, by snapping their weekly losing streak and crowning this the “comeback week.” Yesterday’s session saw the biggest laggards / short-covering lead the charge and today followed suit once more. In the last 3 days the moves were specific — XRT +13.5%, GS Most Short +12.83%, NYFANG +10.5%, etc. This morning started with futures extending gains as the PCE Deflator data (Core YoY +4.9% vs 5.2% previous) seemed to shows signs of having peaked.
No News is Good News! This post Fed-minutes mentality that markets finished with yesterday continued into today, and markets were primed to bounce again – they did just that, with the most beleaguered names once again leading the way. A few better than expected Retail reports (DG +13.8%, DLTR +21.9%, M +19.3%) helped futures shrug off some of the early strains from Big Tech, but this morning’s backwards looking economic data didn’t help ease the growth fears that have weighed recently.
The investment puzzle of 2022 remains complicated no doubt, but one of the main concerns has been the Fed fetish the markets have developed. With inflation soaring, the Fed is hiking aggressively and 50bps for June and July is widely expected. Their rate path trajectory after that remains a question though, and for a market that is trying to re-allocate for the future economy, not knowing the end time makes it difficult to price assets.
This is starting to feel a bit like the market that cried wolf. Every time this market looks like it’s drumming up a bit of courage to go higher, the powers that be smack it on the nose. Equities took a significant step forward yesterday towards halting the weekly streak of losses but a string of poor earnings and the commentary within SNAPped (-43%) that momentum before it started.
Strictly going off the calendar it wasn’t that long ago (January 2020) that the S&P ended a streak of 70 consecutive trading sessions without a move up or down of more than 1%, but emotionally speaking it feels like at least a century ago that markets were that quiet (I can think of one or two developments in the interim…) The truth is in the volatile markets of 2022, even a +1.9% gain on the S&P (the biggest since last Tuesday!) doesn’t necessarily warrant a ton of attention, and with that today fit the bill of “one of those Mondays” where most market conversation focused on what’s to come later in the week.
Frenzied, frustrated, chaotic, simmering anger. Those are just a few of the emotions and descriptors I can use in this family publication after spending much of the last 8 days at various airports throughout North America. The payoff of course was seeing some of you all but getting there and back proved difficult. The worry about being away from the desk is missing what’s happening in the market but the experiences at least seem quite similar.
It doesn’t feel great that the day after the biggest down day for the S&P since June 2020 is followed not by a bounce, but another down day. There are a lot of worrying takeaways from today’s market, but perhaps the most important is that we still have not yet hit capitulation. As our charts team so eloquently puts it, if you have to keep asking if it happened, it hasn’t happened yet – you’ll know it when you see it
Woof… It’s hard to know what to say on a day like today as markets posted one of the ugliest declines in a year that’s unfortunately been chock-full of them C in fact (in the spirit of precision) it was the worst single-day performance for the S&P since June 2020. Red basically everywhere you look, but the sell-off was especially demoralizing given it marked a screeching halt to the much-discussed “bear market bounce” before it really even got started.