Our main thought on 9/11 is not only to never forget but know there are others that would do the same. It tells you how fantastic our security apparatus is.
What you have just seen in the past 2-3 days is the largest 2-3 days reallocation from momentum to value we have seen in ages. We started to alert to this this past weekend but it has really picked up this week. Many momentum growth names are down 5-15% and even more in the past two days while a ton of stocks on the new yearly low list have seen their stocks soar off the lows. This is a shift long overdue as the chart of growth versus value had gone to extremes to the growth side.
So…we continue to believe:
Bonds have put in a near term top…if not more. The last move in bonds felt somewhat climactic in where we found $18 trillion of bonds yielding negative. The 10 year has backed up from 1.45% to 1.74% in short order. This, more than likely, takes a 1/2 point cut off the table.
Oil prices and oil stocks look to have put in a decent bottom. Remember, this is a commodity that gets moved by geopolitics but for now, looks like money flows are moving into this area. The same goes for commodity-types.
Other areas that were comatose and have now woke up are the small and mid-caps, cyclicals, many foreign markets, transports and very simply, the worst acting stocks in the market (supposed value). We do not know how long this lasts or how far it goes but suggest this may not be a few day affair.
The big 4 indices remain above the 50 day. This is vital going forward. The SOX remains above the 50 day. This is vital going forward. Because of the back-up in rates, financials have finally woke up as spreads widen. This is also vital for the markets going forward. If anything changes, we will let you know.
Normally, when the leading growth groups get slammed…and the word “slammed” is being nice, it would mean a death knell for the markets overall. But so far, this is just vicious rotation. Pay heed as what worked so well for so long is now biting back.
Lastly, President Trump is out this morning calling for negative rates from the fed as well as more printing of money. This comes from a president that railed against the easy money of the Obama/Bernanke era. You obviously know what we think of this.