July 12, 2021
Good morning,
A very tough week in bond-land last week finished on Friday with the pundits reporting that the swift and surprising move down in yields last week was not fundamental (that eco-growth may not be as robust as previously thought), but was instead due to a technical condition of the market where too many investors had crowded into the yields-are-going-higher bet. They announced that last week’s move was just a squeeze of bond shorts who all believed that yields were on a one-way road to 2% (10yr Treas). That news seemed to be enough for equities to rally strongly, erase the prior 3-day losses and finish the week in the plus column (+40bps/wk on S&P 500). The whole “squeeze” argument seems a bit specious as there is little evidence that there were big shorts in the weekly Commitment of Traders report last week. I guess supporting data is no longer required at this stage of our bull market’s life-cycle. That would be a late-stage sign for anyone who still cares about such things.
The past is past however and earnings season is upon us beginning tomorrow. The estimates are through the roof with most prognosticators saying that if they are wrong, they have under-estimated. There’s another late stage sign for us.
See you Wednesday from the west coast – so looking forward to seeing clients, associates and family I have not seen in way too long. No vacation here – for those tracking my disturbingly high market crash/vacation ratio.
Be well,
Mike