The Great Summer Rotation Continues

Equities start the day higher as the Great summer rotation continues. So it’s been awhile right? Recaps have been as scarce as British Wimbledon Champions. Actually I decided I wasn’t going to write again until Twinkies came back and Andy Murray won so I guess it’s time to rock this market commentary thing once again. So where do we go from here? First let’s take a quick peek at the big picture. 1) Bonds imploding 2) Cmdtys imploding 3) EM imploding 4) US economy growing and 5) stocks humming. If you are Bernanke aren’t you happy with all of that? You’ve re adjusted the bond market and strengthened the dollar with little impact on Equities. Crazy. So what’s up for the 2nd half? Well I think more of the same, for a couple of reasons. First and foremost is the fact that all of the money sitting in bonds and cmtdys and EM has to go somewhere. There are only so many deep, liquid places to park massive amounts of capital. I guess it could sit in cash but do you really think that’s going to happen if stocks remain firm? Second, and more importantly, the US economy is growing. Not enormously, and not without headwinds, but its growing. Employment and Housing, the two pillars we’ve talked about all year, are still trending upward. Take a look at one of the BEST leading indicators of an economy..residential investment. That chart is subject to a one quarter lag but I’d bet my near mint Spiderman action figure that it’ll look even better on the next release. So to sum up: Bond market jitters, deep liquid equities, an economy that is growing, a helpful Fed…..where else would you wanna be for the 2nd half?

After the open it felt like July 4th...again…but this time there was no hot dogs or warm beer just an extremely quiet and listless market. Stocks were higher but only because Europe put in a good day, we had no economic data or any other catalyst that was responsible for the gains. Earnings are about to ramp up so I guess that’s one reason why it was so slow (make sure you bookmark this link to know when the real fireworks go off). Any decent movers? Not really, utilities did well but you can chalk that up to deceased cats bouncing. At 1pm ET on Friday, the day after a major holiday and the day before a weekend, the market had traded 2.8B shares. At 1pm ET today, the market had traded 2.9B shares. That’s all you need to know about this morning. Yikes. By lunch we sat on 1,638, up 0.4%.
The back half of the day was as exciting as the Greater Toledo Livestock and Quilt Expo and we closed right where we were at lunch, 1,638. There was one bright spot in that both bonds and stocks rallied so at least it’s not an “either or” market right now. Basically the next leg is going to come down to earnings and frankly that’s how it should be. We are moving from a “good news is bad because it means less Fed” type of market to a “good news means things really are improving” and that would be a sea change in sentiment. Remember those days? Back yonder? When stocks actually moved on economic data / earnings and not what Bernanke had for breakfast? I do (briefly)…let’s hope we truly are moving in that direction. Final Score: Dow +59bps, S&P500 +53bps, Nasdaq +10bps, Rus2k +37bps.

News Highlights:

We’re gonna end tonight with a good ole fashioned Fail video. It’s a slow day, may as well try to laugh it off.

Have a good night.