The macro data from the past month continues to mostly point to positive growth. On balance, the evidence suggests the imminent onset of a recession is unlikely.
Global equities have risen 7% in the past 3 months and 16% in the past year, yet fund managers continue to hold significant amounts of cash, suggesting lingering doubts and fears.
US equities reached a new one-month low late last week before rebounding on Friday. In particular, NDX found support right on its mid-May low. This is now an important line in the sand, with implications for SPY as well; so long as the Thursday low holds, look for higher prices.
The strong, uninterrupted start to the year for equities is very likely to lead to further gains in the second half of the year. But the crack that opened in NDX two weeks ago has widened further and the consistent historical pattern is for SPX to follow, lower.
Take the US tech bubble of the 1990s, add the subsequent real estate bubble of the 2000s, multiply by two, and you have a good approximation of the events leading to Japan's stock market crash in 1990. The Nikkei stock index rose more than 900% in the 15 years before it finally topped. It was a frenzy powered by a belief that Japan Inc. was on its way to taking over nearly every major industry worldwide. The stock market bubble was further fueled by a massive real estate bubble at least twice the size of the one the US experienced in the 2000s. Tokyo alone became more valuable than all the land in the US. In short, it was the product of a tsunami of monumental and concurrent events that are unlike anything present in the US today.
NDX has opened a noteworthy crack in US equities. NDX has fallen 4.5% in the past week. In the past 7 years, falls of more than 4% in NDX have preceded falls in SPY of at least 3%. That doesn't sound like much, but it would be the largest drop so far in 2017. A key watch out now is whether NDX weakens further and breaks both its 50-d as well as its mid-May low; if so, then SPY is likely to follow with its first 5% correction since the US election.
Global equities have risen 5% in the past 3 months and nearly 20% in the past year, yet fund managers continue to hold significant amounts of cash, suggesting lingering doubts and fears.
Higher environmental standards and reduced carbon emissions have not harmed the US economy. They have arguably contributed to technological innovation and the advent of new industries and better jobs.