ARKK - Current Macro View: A Neutral Backdrop
2024-05-12 07:56:00 ET
Summary
- The scorecard remains tight and, in my view, tilted to a more neutral setting. I see nine pros and nine cons, with six segments classified as "neutral".
- The Administration's budget includes plans to increase taxes by $7 trillion, which could have significant implications for businesses and individuals.
- "Policy" is the biggest threat to the US macroeconomy.
Don't hope. Hope is for people who aren't prepared. - Kareem Abdul-Jabbar
THE MACRO VIEW
The Weekly MACRO report should serve as a time to pause and reflect on the Bigger picture that is never as volatile and tumultuous as the everyday/weekly market scene. Given the frantic pace of the recent price action, take some time to pause and reflect on the entire market backdrop.
I last published the Equity Market PROs and CONs report in February. At the end of that month, it appeared the indices were going to break record high after record high, but the rally slowed. In February's report, the PROs slightly outweighed the negatives 12-11, with two issues I considered neutral. Since that report, the S&P 500 has rallied ~1.9%, so the price action fits the backdrop.
PROs
1. Bull Market
2. Technicals
3. Breadth
4. Strength Begets Strength
5. Healthy Rotation
6. Jobs
7. Mega-Cap Strength
8. Election Year
9. AI Boom
1. BULL MARKET
The current bull market will likely go down as the "AI" bull market since it began just before ChatGPT was released in November 2022. The S&P is now up 46% during this bull, but that's still not close to the average bull market gain of 114% or even the median bull market gain of 76.7%. Bull markets are typically long and steady, while bear markets are short and steep. Being in a bull market is undoubtedly a "Pro" and one that you don't want to fight.
2. TECHNICALS
Short-term technicals have rebounded, while long-term uptrends have been in place since mid-2023 for major US index ETFs, even the small-cap Russell 2,000. All remain well above their LONG-TERM trendlines. As we have seen, the S&P had room to consolidate without suffering a breakdown and has quickly rebounded.
3. BREADTH
As measured by the S&P 500's cumulative advance/decline line, market breadth has tracked price tick-for-tick over the last six months, so there has been no negative divergence to speak of. We're just coming off one of the longest streaks of trading days, where more stocks were making new 52-week highs than lows....
Current Macro View: A Neutral Backdrop