Note to Readers from Larry: Today, we witnessed very large Dip Buying activity in American Express - one of the most important names that represents consumer health along with Visa and Mastercard. Although Tesla negativity is the headline focus, I don’t believe today’s auction marks a decisive victory for Bears just yet. In my view, I see American Express as far more important than Tesla from a systemic perspective.
Generally speaking, I think it will take a confluence of factors to completely take down market confidence (and therefore market levels downward). TSLA alone starts to change the market tone, but in previous points of history during the Dot-Com bubble, it was weakness from titan firms like Microsoft that marked the end of the bull run.
I believe further weakness is coming, but there are likely upward prints above today’s tape before any selling commences. While Bears will eventually have the edge, they need to remain patient and thoughtful. Bulls may still have opportunities to leave the market before the exits become crowded.
I would encourage public readers to join our Community while the VIX is still between 16 and 18. This market environment still gives us time to plan ahead while cooler heads prevail. This is sincerely the best time to learn to grow and become the Analyst/Trader/Investor you’ve always wanted to be.
Key Investing Resource: Strategist Larry uses Interactive Brokers as his core brokerage. Feel free to check out IB. I currently park excess cash (yielding 4%+ on idle cash) at Interactive Brokers
In our emails, we will provide the following coverage points:
“Consensus holds that strong YTD risk performance stems from genuine improvements in the economic outlook. But a better explanation is the injection of over $1tn in central bank liquidity. This held down real yields, propped up equity multiples, and tightened credit spreads in the face of falling earnings expectations. High-frequency liquidity indicators suggest this is already stalling, and the coming weeks seem increasingly likely to bring a sharp reversal. Higher TGA and RRP, ECB QT, and reduced China easing could easily see a net drain of some $6-800bn, even before any additional spike, thanks to the debt ceiling. With peak liquidity past, we would not be at all surprised if markets were now to experience a sudden pressure loss.” - Matt King, Citi
The global median CPI rate has only marginally fallen from its recent peak. And the percentage of major EM and DM countries whose year-on-year CPI is in an upwards trend is back at 100% after a brief dip.
Chart That Caught Our Eye
Analyst Team Note:
Ratings firms are on track to cut the most US corporate bonds to junk since the early part of the pandemic, further boosting funding costs for some companies just as economic growth is slowing.
In the first quarter, a total of $11.4 billion of bonds were downgraded to high yield status, a figure that’s about 60% of 2022’s full-year total, according to Barclays. Full-year volume is on pace to be the highest since 2020.
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