June 17, 2024
Good morning,
While there’s been no shortage of headlines about the latest record highs on the S&P 500 (SPX) and NASDAQ, the highs have been less significant as a sign of market strength than as an influence on investor sentiment. When excessive optimism is the only market data signal accompanying new price highs on the SPX, it is normally time for a market pullback. There is not enough evidence to suggest the dimensions of a pullback, just that an overbought market demonstrating many signal divergences from the new high on the SPX makes for a pullback-rich environment.
That said, with the NVIDIA stock split, Apple World Wide Developers Conference (WWDC), and Federal Open Market Committee (FOMC) meeting behind us, there doesn’t appear to be a near-term catalyst to push stocks higher. This week ahead is economic data light, with only Retail Sales on Tuesday. While not a key inflation data point, consumers are 70% of U.S. GDP – retail sales are no slouch at the data dinner table. With recent evidence suggesting consumer savings are drawn down, and credit card borrowing is up, there is a higher likelihood to a downside surprise to Tuesday’s number. Throw in the fact that the Fed officers will be stumping around this week, and it’s hard to think that the equity market rally isn’t due for a break.
Be well,
Mike
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