Good morning,
For the first time this month, this morning’s Morning Note feels largely unnecessary to me. Maybe the market is telling me to return to my usual twice/week cadence. Has normal returned to the markets, or are chaos and uncertainty just taking a break? There is no way of knowing for sure, but based on Monday’s Morning Note, you know I lean toward the latter. It does seem like the equity market is on a mission to close up for the month of April, as it has largely ignored recent economic releases. Yesterday’s latest presidential Fed-bashing – which might have made a significant impact a couple of weeks ago – has been met with little more than a shrug from stock prices.
At 8:30 ET, an avalanche of economic data was dumped on the news tape, and markets are unpacking it all as I type. ADP employment numbers, Q1 GDP, Q1 PCE, refunding figures … yikes. The immediate market reaction is taking stock and bond prices down a bit – Futures are off -1%, and bond yields rise 4bps (on UST-10yr). In general, the pile of data points to slightly slower economic growth and mild pressure on rising inflation – directionally a problem for stocks and bonds.
At last night’s close, the S&P 500 Index was down -9.5% below its recent peak (February). As we all ponder whether normal is back for markets or signs of a bear market and recession still lie ahead, I can not stop thinking about the idea that it is unlikely that the greatest investor of our time converted an unprecedented percent of his portfolio to cash to avoid a 10% correction.
Be well,
Mike