Holiday Ending Soon

This has been a quarter to remember. The world hit pause. We same the BigFoot Macro’s break (sort of). And the markets tanked… then rallied… hard.

Recall earlier blogs and forum calls – the discussion was about how fundamental data didn’t matter. The reason was because the Fed and Congress were re-writing the rules of the game on the fly. Stimulus, loans, loan forgiveness… it was all on the table.

Well, the markets rebounded as trillions of dollars got pumped into the system. But you can count the weeks since the market low: 13 weeks in the book. One quarter.

During the economic shut-down, most companies got a pass on earnings, guidance, and just about anything other than a discussion about whether or not they would survive. Companies that were well positioned for work-from-home scenarios benefited. Others, not so much.

So here we are. The economy is re-opening… likely regardless of what happens with the virus. The American public is divided. Camps have been chosen. Resolve stiffened. And the markets play on…

History has shown us that markets tend to think a quarter at a time. Long-term investors ride things out longer. But professional money managers, while sometimes long-term thinkers, will tweak and rebalance in the shorter term (some shorter than others).

When everything hit the proverbial fan, quarterly data went with it. It left investors with little more than educated guesses as to how things would play out in the future.

Well, the collective ‘pass’ given to companies during the last quarter — that is to say, a pass on giving much data or guidance — is likely coming to an end. It’s been 13 weeks — one quarter — and it’s time to start reckoning with the world as it now exists. Will companies thrive, survive, or otherwise in the post-Covid world?

So as Spring yields to summer, and Q2 passes the baton to Q3, it’s probable data will come back into vogue. And the question buried in the data is, when will valuations come back into vogue as well?

The Fed’s money creation and bond purchasing has stabilized the fixed income market to a great extent. But it’s left risk-equivalent yields all over the board. Sooner or later, markets are bound to address this.

So enjoy this week. The patter is sideways. The 200-day moving average is still holding at support at 3018 for the SPX. And the big fat number 3000 has held up will just below that. Given the nature of this week — few earnings, still too far out for election to be relevant, and the end of the forgotten data quarter — things appear to be relatively benign this week.

If anything changes, we’ll update the blog. Otherwise, look for a sideways-to-slightly-positive bias to the week with neither up-side nor down-side breakouts likely at this point.


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