US Economic Acceleration Fuels Bullish Trend in Stocks
US Labor Market Remains Robust
The US labor market continues to show strength, as indicated by the Conference Board's confidence survey. More Americans view jobs as plentiful and fewer view them as difficult to get.
The widening labor differential is a positive sign for the US economy, suggesting healthy expansion in the job market.
This, combined with positive new home sales data, paints a picture of resilience for the world's largest economy.
These positive economic indicators have contributed to the bullish trend in US stocks.
Broad Equity Market Tone
The equity market tone remains broadly positive, with almost every sector experiencing growth.
Market-leading stocks have outperformed, although volume has been below average.
Investor angst, measured by the volatility index (VIX), has decreased by 4.2%.
The DJIA intraday % swing was 0.49%, indicating a relatively stable market, while the Bloomberg Global Risk On/Risk Off Index rose 2.9%.
The CBOE S&P 500 Implied Correlation Index decreased by 6.2%, suggesting reduced market volatility, while the ISE Sentiment Index was down 2.0 points.
Credit Investor Angst
Credit investor angst has decreased, indicating a positive trend for financial markets.
The North American Investment Grade CDS Index decreased by 2.77%, signaling improved credit conditions, while US Energy High-Yield OAS was down by 3.2%.
The European Financial Sector CDS Index decreased by 2.2%, suggesting increased stability in the European financial market, while the Deutsche Bank Subordinated 5Y Credit Default Swap fell by 0.87%.
The Italian/German 10Y Yld Spread decreased by 1.0 basis point, indicating reduced risk perception, while the Asia Ex-Japan Investment Grade CDS Index increased by 2.2%.
The Emerging Market CDS Index decreased by 2.5%, and the China Corp. High-Yield Bond USD ETF (KHYB) increased by 0.19%.
Positive Economic Gauges
Various economic gauges show positive signs, hinting at a potential bullish trend in the market.
The Bloomberg Emerging Markets Currency Index experienced a slight decrease of 0.03%, while the 3-Month T-Bill Yield decreased by 3.0 basis points.
The Citi US Economic Surprise Index rose by 16.9 points, indicating better-than-expected economic performance, while the Citi Eurozone Economic Surprise Index rose by 1.8 points.
The US Atlanta Fed 2Q GDPNow Forecast decreased by 18.0 basis points, reflecting a slight adjustment in growth expectations, while the Cleveland Fed Inflation Nowcast Core PCE YoY remained unchanged at 4.70%.
The 10-Year TIPS Spread remained unchanged at 2.20, with the highest target rate probability for the Sept. 20th and Nov. 1st FOMC meetings at 67.2% and 58.4%, respectively.
Importance of Monitoring Portfolio
Investors should remain vigilant in monitoring their portfolios, recognizing that the current bullish trend may not last indefinitely.
The market exposure has shifted to 75% net long, driven by gains in the tech, industrial, utility, and medical sectors.
Disclosed trades have seen investors covering some of their IWM/QQQ hedges and emerging market shorts.
By actively managing their portfolios, investors can take advantage of potential opportunities in the market.
As always, it is crucial for investors to consider their risk tolerance and investment goals before making any investment decisions.
Conclusion
The US economy is accelerating, driving a bullish trend in the stock market.
Positive economic indicators, broad equity market performance, reduced credit investor angst, and favorable economic gauges contribute to investor optimism.
However, it is important for investors to remain cautious and monitor their portfolios, as market trends can change.
By staying informed and adapting to market conditions, investors can position themselves for potential success.
Overall, the current market environment presents both opportunities and challenges for startups and established businesses alike.
References
Unknown. (June 27, 2023). Stocks Surging into Final Hour on US Economic Acceleration Hopes, Loosening US Financial Conditions, FANG+ Stock Frenzy, Tech/Transport Sector Strength. .
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