I’ve used this analogy before, but on days like today, one can’t help but feel like investors are nothing more than Pavlov’s dogs, salivating for the inevitable treat they’ve been conditioned to expect. As for Pavlov, he is of course played by Fed Chairman Jerome Powell, also known as the Wizard of Oz.
Article Category: Yield Curve
The financial markets have been telling a fragmented story ever since the beginning of 2019, but that appears to be changing. Over the past month, the messages coming from stock and bond markets have begun to coalesce in a manner that unfortunately, will likely leave a bearish taste in your mouth.
We saw a strong rally in global equity markets yesterday, and much of that move was predicated on an improving Chinese landscape. On Sunday, the official Chinese Purchasing Managers’ Index came in at 50.5 (for March), signaling expansion for the first time in four months. The previous reading of 49.2 represented a three-year low.
There have been quite a few interesting developments over this past week, so we have a lot to cover. I want to begin by drawing your attention to the divergence between stock prices and bond yields. We discussed this back on March 5th, but since then, things have deteriorated even further.
The first thing I want to mention today is that the S&P has finally cleared its overhead resistance at 2815. As you can see below, that price level turned the index back on five separate occasions. The fact that prices are holding above this mark is a good sign, as it suggests the selling pressure at this level has subsided.