From the desk of Willie Delwiche.

Key Takeaways:

• Rally lacks conviction.
• Looking for a thrust I can trust.
• Fed and bond market moves become headwinds for stocks.

In addition to these market concerns, the liquidity backdrop is presenting a more acute challenge for equities. The Fed raised rates 25 basis points last week and the futures market is now looking for another 100 basis points of tightening combined at the May and June FOMC meetings. Corporate bond yields are rising at their fastest pace since the financial crisis and more than half of global central banks are now in tightening mode. During the last cycle, it took the 2-year Treasury yield more than 6 years to move from its low to back above 2%. This cycle it completed that move in just over 1 year. The pace of tightening (from the bond market and from the Fed) matters for equities. Stocks tend to struggle when that pace is elevated, as it appears to be in this cycle.

From the desk of Willie Delwiche.

Key Takeaways:

• Market experiencing most persistent weakness since Financial Crisis.
• Path forward is about finding new opportunities rather than repairing past paradigms.
• Energy & Latin America benefitting from Commodity strength.

From the desk of Willie Delwiche.

Key Takeaways:

• In an effort to fight inflation, the Fed is likely to accept volatility but will be wary of stress.
• Equity market trends are deteriorating.
• Preserve capital and sanity - market doesn’t hand out participation medals.

Offsetting this likely need for more aggressive tightening is the potential for sanctions to strain the financial system in unexpected ways. When liquidity gets disrupted signs of stress can emerge. A widening in high yield spreads and/or a breakdown in the ratio between high yield bond and Treasury ETFs would be evidence that volatility is morphing into stress. That could slow the pace at which the Fed tightens and in the process worsen the problem of inflation.

From the desk of Willie Delwiche.

Key Takeaways:

• First 10% correction in two years signals the end of an extended period of relative calm for stocks.
• US breadth is slipping while global breadth is more resilient.
• Recent stock market volatility is unlikely to knock the Fed off course.

From the desk of Willie Delwiche.

Key Takeaway: New highs being seen in areas where most investors have little exposure. Liquidity pressures build as corporate bond yields rise. Indexes consolidating after recent highs lacked broad support.

• Energy remains at the top of the relative strength rankings, followed now by Financials. Materials continued to climb, rising to the number four spot this week. 
• Defensive sectors saw their recent relative strength moderate last week. Consumer Staples dropped one spot, Utilities were down two spots and Real Estate fell by three.  
• Our industry group heat-map shows this is a sector/group-sensitive rather than size-sensitive market right now. Growth sectors are being dragged down regardless of size.

From the desk of Willie Delwiche.

Key Takeaway: Bonds make good on their resolution to take rate hikes more seriously. Breadth thrust prospects are fading but global resiliency is encouraging. Fed will be late to the rate hiking party and so recent tightening cycles may not be as relevant.

From the desk of Willie Delwiche.

Key Takeaway: Falling bond yields do not inspire confidence. Industry group trends faltering as breadth weakens. Holiday cheer has already turned sour.

From the desk of Willie Delwiche.

Key Takeaway: A surge to new highs can leave stocks out of breath. S&P 500 at an all-time high while more NYSE stocks make new lows than new highs. FOMC meeting likely to feature Fed grappling with surging inflation.

From the desk of Willie Delwiche.

Key Takeaway: Mid-caps lead the way as new highs lists expand. Breadth heading in a positive direction but still has work to do. Market rewarding stocks that beat earnings expectations, punishing those that miss.