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CNBC
9 hours ago
- Business
- CNBC
The markets are telling you not to worry with steep drop in volatility. Should you listen?
As midsummer sets in and the trauma of the springtime sell-off fades, the markets are whispering, "Don't worry." With every orderly ratchet higher to a record high in the benchmark indexes, affirmed by a breakout in bitcoin as gold sleeps, a steep retreat in market volatility and a collapse in corporate-credit spreads, the investment universe is telling you to relax. It would be unwise to tune out the message, given the tone of the tape and the tilt of the evidence. But it never hurts to try to anticipate what the markets might find if they soon go looking for something new to worry about. With its uptrend reasserted, the S & P 500 is up some 30% from the early-April tariff-panic low, an extraordinary recovery in just over three months. It has now logged eight record highs this year, not bad but not close to last year's total of 57. .SPX YTD mountain S & P 500, YTD Big picture, the index has simply climbed out of a seven-month sideways range. Last week, the index dealt with modest overbought conditions by slowing and initiating a salubrious rotation from overheated areas to neglected ones. The key factor determining month-to-date performance among Russell 1000 stocks has been how they'd done in the prior 12 months. The worst-performing 20% over the prior year was up 6.2% as a group heading into Friday's session, according to Strategas Research, while the top one-year performance quintile was about flat for July. Cyclical groups including bank stocks, and those compressed credit spreads, continue to show a market largely unconcerned about serious economic difficulty emerging. Indeed, the Citi U.S. Economic Surprise Index has climbed out of a trough back into positive terrain. Global indexes, up double-digits as a group this year, are also confirming this firmer macro assessment. Even Nvidia's rush to become the first $4 trillion market-capitalization company — which could easily be viewed as a "Mission Accomplished" moment of culmination — was not accompanied by quite the same level of trader exuberance as greeted the stock's somewhat similar ramp to $3 trillion in the summer of 2024, according to Renaissance Macro Research. Investors assuming tariff threats are bluffs Investors' steady resolve not to recoil at the return last week of bellicose tariff rhetoric from the White House seems to ratify the old Wall Street maxim (which is usually though not always correct) that "the market never discounts the same news twice." New trade-deal deadline, same threatening terms. Unlike in the spring, when the proposed rates had shock value and came as part of a broad sense the administration was interested in engineering a "detox" period of pain before gain for the economy, the impact now is seen as contingent and localized. For sure, this can prove too sanguine and perhaps there will be unanticipated economic friction ahead. There is a fair debate to be had about the implications of a "Don't get fooled again" attitude. For investors, is the resolve to assume tariff threats are bluffs and the impact easily handled a wise stance based on lessons learned in the April overshoot sell-off? Or does it leave them looking on the bright side when the blow comes from the other direction? But we are now in a moment when a slowed-but-unbowed labor market is holding up, consumers are maintaining their spending, oil prices are tame, a rip-snorting capex cycle won't quit, and a Federal Reserve rate cut – perhaps into a resilient economy floated by loose financial conditions – is coming into sight just beyond the summer. If the economy hangs in there as it has, with whatever abrasions from trade friction is applied only to the 25% of S & P 500 earnings that Deutsche Bank estimates are in the path of tariffs, then the growing AI boom-to-bubble cycle might dictate the terms of the tape for a while longer. This neatly captures the bull case from here, one that is plausible but leans on some rosy scenarios and lucky breaks that would continue to make this period follow the path carved in 1998 into 1999, a prior episode when a sudden global shock caused a near-bear-market followed by a rapid recovery to record highs, floated on fast-running speculative juices and technological utopianism. A rally that began at a moment of "peak uncertainty" finds itself now bathed in plenty of perceived clarity. This doesn't imply some cutesy 180-degree logic that now argues for a peak. Bull markets can sustain themselves on broad-scale belief and "good enough" data for extended stretches of time. Tough calendar ahead Still, why not stay mindful of tactical trap doors and slow-growing market distortions that could serve as the excuse for some near-term gut checks or even long-term reckoning. The calendar is one place to start. Around now seasonal patterns turn less friendly. July 15 is the date over the past 25 years when the average forward three-month S & P 500 returns have been the worst, according to Bespoke Investment Group. Last year's experience is worth recounting. The broad market rode a giddy melt-up in mega-cap tech right into the second week of July 2024 before at first a radical internal rotation and then a broader pullback generated the only serious setback of that year. The CPI report on July 11 last year was softer-than-expected, which unleashed instant expectations that the Fed could soon start an easing cycle to ward of an emerging economic slowdown. The Nasdaq 100 rolled over, the small-caps surged and for a time it appeared the "broadening cyclical rally" so many investors wished for was underway. Yet the shift in leadership grew disorderly, a nasty reversal in global hedge-fund "carry trades" pressured risk assets. The S & P 500 shed some 6-7% in all but was dead money for two months and never reached escape velocity from its mid-July high until after Election Day. Maybe the proximity of such a clear parallel set-up makes it less likely to repeat in consecutive years, but why not stay aware? Some concerning behaviors Macro Risk Advisors strategist John Kolovos said, "The biggest worry here is sentiment. The negativity that fueled the V-Bottom has disappeared. Still, my base case hasn't changed. I continue to believe the market will undergo a deeper setback or 'gut punch' later this summer. That call still rests on two pillars: intermediate-term momentum is not yet overbought, and cycles/seasonality don't turn into headwinds until August. Until then, there's still a window of opportunity for an everything rally." As for longer-simmering, perhaps more structural market behaviors that should raise eyebrows? Perhaps the degree of financial aggression and engineering that is starting to become a feature of the AI investment rush. Meta Platforms taking on debt from private-capital sources to accelerate its data center buildout while the company offers reported nine-figure compensation packages for top AI talent. CoreWeave using its expensive shares as currency to agree to acquire Core Scientific, months before a great many more CoreWeave shares become available for sale following its post-IPO lockup. The wild extrapolation of current electricity-demand growth for AI applications, which imply such usage in five years will match Japan's power consumption today. Perhaps, but if power is the key constraint won't the AI geniuses be incented to work around it? Much the same was said about the structural scarcity of bandwidth 25 years ago. Oracle going free-cash-flow negative as it ramps capex, while the likes of Microsoft and Alphabet forgo free-cash-flow growth – handing a huge share of their cash to Nvidia, effectively. Robinhood creating "tokens" intended to be backed by equity in private startups, prompting OpenAI to disclaim any connection or endorsement of the derivatives. (Not a suggestion of any wrongdoing, but notable.) The good news here is that all of these trends grow from smart, rational professionals competing to build a promising future of greater ease and productivity (we hope). It's further reassuring that such booms tend to run for years and reach more extreme extremes, and we're not even deep into an AI IPO frenzy or massive buildup of financial leverage upon unstable technology cash flows. So maybe what the markets are really trying to say is, "Don't worry – yet."
CNBC
3 days ago
- Business
- CNBC
Jeff deGraaf: Don't think there's too much market complacency
Jeff deGraaf, Renaissance Macro Research head of technical research, joins CNBC's 'Closing Bell' to discuss market expectations.
Bloomberg
22-04-2025
- Business
- Bloomberg
Bloomberg Surveillance: Dollar Dominance
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney April 22nd, 2025 Featuring: 1) Jeff deGraaf, Chairman and Head: Technical Research at Renaissance Macro Research, joins for a discussion on Jay Powell, market risks, and tariffs. US stocks were higher in futures trading this morning as equities are set to bounce back from Monday's losses as investors weigh progress on trade talks with India and Tesla's upcoming earnings. 2) Brian Belski, Chief Investment Strategist at BMO Capital Markets, brings us into the market open and discusses whether he remains a US equity bull. President Trump's demands on Jerome Powell to cut rates have raised concerns about the president's willingness to meddle with central bank policy and the impact on the economy. 3) Alicia Garcia-Herrero, Chief Economist for Asia Pacific at Natixis, joins for a discussion on the dollar as the globe's reserve currency and how the trade war will harm China and the US. This morning, gold topped $3,500 for the first time, and other markets such as stocks, currencies, and commodities experienced mixed movements amid ongoing trade tensions and uncertainty. 4) Warwick McKibbin, non resident Senior Fellow at the Peterson Institute for International Economics, talks about his piece from the fall outlining the costs of Trump's tariff and deportation policies as well as his newest analysis released today on the US revenue implications of Trump's tariff plan. 5) Margaret Franklin, CEO of the CFA Institute, joins from our DC studio to discuss the CFA program, how it's evolving, and the impact of AI on the investing profession. 6) Lisa Mateo joins with the latest headlines in newspapers across the US, including a Financial Times report on the marketing campaign of plant-based eggs and the Washington Post's look into the changing economics of college football and how it's affecting the NFL draft.
Bloomberg
11-04-2025
- Business
- Bloomberg
Lots More on Why Neil Dutta Is Sticking With His Recession Call
Listen to Odd Lots on Apple Podcasts Listen to Odd Lots on Spotify Subscribe to the newsletter On Wednesday, President Trump put a 90-day pause on reciprocal tariffs for every country except China. The market, which had been in a state of deep panic, surged massively on the announcement. But then on Thursday, stocks sold off hard again as people woke up to the reality of massive tariffs on China and the new baseline tariffs on everyone else. Plus, even before all this tariff drama, there were plenty of reasons to be anxious about the US economy. On this episode of Lots More, we speak with Neil Dutta of Renaissance Macro Research. He explains all the moving parts and why he's sticking with his call for a downturn this year.
Bloomberg
04-04-2025
- Business
- Bloomberg
Bloomberg Surveillance: Jobs and Tariffs
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney April 4th, 2025 Featuring: 1) Claudia Sahm, Chief Economist at New Century Advisors, Neil Dutta, Head: US Research at Renaissance Macro Research, and Jamie Patton, Co-Head of Global Rates at TCW, react to today's jobs figures and discuss the outlook for the Fed and Jay Powell. Traders have increased their expectations for the Federal Reserve to cut interest rates this year, with money markets now showing 100 basis points of reductions by year-end. 2) Dan Ives, Global Head of Technology at Wedbush Securities, discusses the "worse than worse case scenario" tariff announcement as it relates to tech. President Trump announced sweeping tariffs on imports from virtually every US trading partner, affecting tech companies like Dell, Apple, Sonos, and HP. The tariffs will increase costs, slow demand, and strain global supply chains, with levies ranging from 10% to 46% on imports from countries like China, Taiwan, and South Korea. 3) David Blanchflower, economics professor and labor economist at Dartmouth University, on labor and wages in a high tariff America. As tariffs set into the American economy, it's unclear how they will affect wages and the labor market. It comes as Republicans are considering creating a new tax bracket for those earning $1 million or more, with a top rate of around 39% to 40%, to offset the costs of their tax bill. 4) Gautam Mukunda, professor at Yale University School of Management and Bloomberg Opinion columnist, on the short and long-term political impact of tariffs. It comes as a new poll shows President Trump's approval rating slipping ahead of his tariff announcement. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including the Wall Street Journal story on the domino affect from the trade war and the New York Times' look at the grocery aisle and the impact of tariffs
