Closing Thoughts for the Week

The majority of data the markets got this week confirmed the idea that the U.S. economy is continuing to slow. Utilities, yet again, beat the S&P 500 by a wide margin last week. This remains one of the weirder market anomalies - the S&P 500 and Nasdaq 100 continuing to push towards new all-time highs, yet utilities is the sector performing better than any other. I’m still seeing weakness in the financial markets and the data may be starting to catch up.

There are other larger macro forces to keep an eye on instead of NVIDIA. In particular, inflation and liquidity. The Fed has talked about hiking rates further, but they’re also going to be adding more liquidity to the system? The Fed can keep rates elevated, but if they’re going to pivot from QT to QE as it relates to balance sheet runoff, you can bet that inflation is going to be around for a while. One index that drives home the risk-off narrative right now is transports.

Along those lines, U.S. retail sales suggest that we might finally be seeing that slowdown in consumer activity that’s been telegraphed for a while. The S&P 500 is up more than 5% month-to-date. Small-caps and the Nasdaq 100 are up 6%. Yet the utilities signal is risk-off. The Treasuries signal is firmly trending risk-off. The lumber/gold signal is risk-off. Don’t ignore what the intermarket signals are telling you here!