Peak Fed hawkishness and weak US growth data have helped US yields and the entire curve break below the recent ranges, driving growth stock outperformance as traders ponder a Fed Pivot.
And looking at the S&P 500 breaking through 4100, it seems like we are in a risk-on, dovish Fed and no US recession nirvana laced rally.
The benchmark has seen a robust 7% increase during the past two weeks. This period also coincides with the entirety of the 2Q earnings season thus far. And while I wouldn't go as far as suggesting that extraordinary earnings have pushed stocks higher, I think it is appropriate to say the market got a bit too bearish ahead of results, and we surpassed that bar.
But, of course, what is good for Main Street and what is good for Wall Street are not necessarily the same. Mainly because the financial markets, by their very nature, pull "the good times" forward, whereas the public lives the gloom of recessionary doom in real-time.
Oil
The choppy and often directionless price action of late is a stark reminder of speculators' role in the market.
Still, nowhere better to view the disconnect between Main Street and Wall Street this day is in the energy space. While anticipatory assets (stocks) are rallying hard on hopes of a Fed pivot, prompt oil prices are struggling due to negative macro data. Most driving-age adults are tightening purse stings as they live in economic slowdown gloom in real-time.
Despite the softer Fed tone, which should eventually support growth, it still seems like traders need little justification to pare bullish bets against a generally gloomy economic backdrop and the threat of a protracted economic slowdown.