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Breadth Thrusts & Bread Crusts: Finding Market Inspiration at the Art Museum

April 1, 2021
JC Parets

From the desk of Willie Delwiche.

I’m now into my second year of working from home. 

Moving to my home office began as a temporary situation during the height of COVID uncertainty. But a day at home turned into a week, which turned into a month. You know the rest.

I was fortunate that I had an office of sorts set up in my basement prior to the pandemic. If ever a basement room could be cozy, this might be the one -- wood plank floor, brick walls, south and east-facing windows that provide some natural light and the opportunity for the dogs to look in on me while they play in the backyard.

Of course, I had to make some changes to my permanent basement headquarters. I've rearranged the room several times to accommodate a growing array of equipment and an always increasing supply of books. I'm on my fifth or sixth iteration of a desk setup as I've moved from sitting on a couch hunched over a laptop to standing at a desktop of salvaged planks and looking at a couple of monitors. 

I am thankful for what I have at home, but there definitely are a few things I appreciated about working downtown…

[PLUS] Weekly Macro Perspectives - Rise in Yields Comes with New Opportunities

March 31, 2021
JC Parets

From the desk of Willie Delwiche.

Key Takeaways:

  • Bonds and gold see double-digit declines in Q1
  • Technology & small-caps vulnerable to further rise in yields
  • Tangible sectors of market showing strength & leadership

One of the biggest stories of the first quarter has been the dramatic rise in bond yields. The Federal Reserve has repeatedly stressed its willingness (even desire) to let the economy run hot. In doing so it has kept the short-end of the yield curve well-anchored. The long-end of the curve, which is impacted by the hopes and fears of bond traders more than pronouncements by the Fed, has seen yields move higher. The yield on the benchmark 10-year T-Note came into the first quarter below 1.0% and has risen above 1.7% as the quarter winds down. The 10-year T-Note yield is finishing the quarter at its highest level since January 2020. As important as the absolute level of bond yields is the turn higher in the longer-term trend and the pace at which that trend is rising.

[PLUS] Weekly Sentiment Report

March 30, 2021
JC Parets

From the desk of Willie Delwiche.

Key takeaway: The evidence continues to suggest we have recently undergone a healthy unwind in excessive optimism. Investment manager’s equity exposure has dramatically pulled back from extreme readings but remains above levels that signals a shift toward risk aversion risk that can weigh on price. Combining that with budding optimism among individual investors and a supportive, neutral backdrop in sentiment arises. Though global markets lack strength from a tactical perspective, the message remains digestion over deterioration given recent breadth thrusts and that the majority of international markets are in uptrends. For now, the reset in sentiment provides upside potential for both optimism and price.

Sentiment Chart of the Week: Risk Appetite Remains Healthy

[PLUS] Weekly Market Notes & Breadth Trends

March 29, 2021
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: Even with bottlenecks & distortions, economic recovery & cyclical rally remain intact. Tactical risks have risen as the market digests gains of last year. Watch bond yields & global participation for evidence that the rally is ready to resume.

[PLUS] Weekly Momentum Report

March 28, 2021
JC Parets

From the desk of Steve Strazza & Grant Hawkridge

Don't miss this weeks Momentum Report; our weekly summation of all the major indexes at a Macro, International, Sector and Industry Group level. As a reminder, we analyze this shorter-term data within the context of the structural trends at play.

[PLUS] Weekly Observations & One Chart for the Weekend

March 26, 2021
JC Parets

From the desk of Willie Delwiche.

The rally in the stock market over the past year has been buoyed by many things and its shows. The year-over-year change in the S&P 500 reached its highest level ever this week as the index moved past the anniversary of its COVID lows. One of the sources of support in recent months has been economic data that have been consistently better than expected. Stocks have tended to do well when economic data surprises to the upside and they tend to struggle when the surprises have been to the downside. While the Economic Surprise Index is still positive, it has come under pressure in March. First, expectations for the recovery are being revised higher, but more immediately, there were a number of data misses in recent weeks. For example, housing market activity for February was weaker than expected (we touched on this in this week’s Perspectives piece). Economic optimism is generally welcome and tends to be self-fulfilling, but if expectations move too far ahead of reality, stocks can find themselves on a rocky path.

Breadth Thrusts & Bread Crusts: Looking forward to this year's Surprise

March 25, 2021
JC Parets

From the desk of Willie Delwiche.

March in Wisconsin (especially here in Milwaukee close to Lake Michigan) is a season of it being already and also not yet Spring. Depending on whether the wind is blowing out of the warm Southwest or coming at us right off of the lake, temperatures can swing dramatically. But the consistent warmth of the Sun heats the Earth and gets the soil ready for planting.

It’s one of the most exciting times of the year for me, full of promise & expectation. I’ve already been at work in the garden (the areas, that is, that are already receiving enough sunlight to soften the dirt). One of several changes in my life over the past year was last Fall’s rebuilding & re-arranging of the raised beds in our backyard. I’m excited by the new layout but it means more work getting them ready for planting. The beds are pretty barren at this point. Rhubarb and horseradish will soon provide some evidence of life, and I tried to work around the asparagus, so hopefully that survived. Garlic, unfortunately, did not get planted.

[PLUS] Weekly Macro Perspectives - Disruptions Strain System

March 24, 2021
JC Parets

From the desk of Willie Delwiche.

Key Takeaways:

  • Even with stimulus, the economy on a bumpy road
  • Bottlenecks testing the resiliency of recovery
  • Despite stress points, growth heading in a favorable direction

Apparently, there is a ship stuck in the Suez canal. Pictures show the “Ever Given” container ship turned sideways in the narrow waterway, with its bow wedged on one bank and its stern close to the other bank. This ship, according to the Wall Street Journal, is one of the largest in the world. It’s 400 meters long (longer than the Empire State Building is tall) and can normally move 20,000 containers. In the current situation not only is it not moving its 20,000 containers but has ground to a halt all traffic in both directions in one of the world’s busiest waterways. On average, 55,000 containers travel through the canal on a daily basis, in addition to numerous ships carrying oil and liquified natural gas. The goods are there, but they are not moving.

[PLUS] Weekly Sentiment Report

March 23, 2021
JC Parets

From the desk of Willie Delwiche.

Key takeaway: After a healthy unwind over the past few weeks that allowed sentiment to reset to neutral, we are seeing optimism rebuild. This uptick in optimism has been accompanied by (as we show in our chart of the week) another breadth thrust. There is room for a further expansion in optimism before it becomes an excessive headwind - and continued broad market strength diminishes such a signal in any event. The combination of breadth thrusts and persistently elevated optimism is reminiscent of the late-2016 to early-2018 period. Then, equity ETFs saw 20 consecutive months of in-flows - we are currently in our 10th consecutive month of inflows (although the pace is quickening, with a record $100 billion over the past four weeks). Equities ran into trouble in early 2018 when breadth thrust tailwinds subsided but elevated optimism remained.

Sentiment Chart of the Week: Another Breadth Thrust 

[PLUS] Weekly Market Notes & Breadth Trends

March 22, 2021
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: Small-caps hit pause but remain market leaders. Another breadth thrust shows rally participation remains robust. Bond yields are digesting recent rise, but the path of least resistance remains higher.