Structural Cracks In The Equities Market

As the S&P 500, Dow and Nasdaq keep roaring to new highs, the disconnect not only among the market sectors, but also among the world’s populace, keeps expanding. 

Yet, in an almost surreal way, tech and Fortune 500 stocks keep running up.

Meanwhile, the civil unrest we see happening on the streets of the world versus the insulation of those in their ivory towers is like the original adobe houses we see in Santa Fe. They are highly valuable despite the cracks in the walls.

Recently, unrest has sprouted all around the world. Hong Kong, Lebanon, Chile, Catalonia, Iraq, Venezuela, Ecuador, Peru, to name a few, headline the list. Issues cited for riots include a stagnating middle class, stifled democracy, and an idealistic belief that things can be different. The younger generation is out protesting about the ramifications of climate change.

Currently, the world’s richest 26 people own as much wealth as the poorest half of the world’s population. But in the 21st century, there is no Bastille to storm. The riots may be increasing, but unlike the 1960’s, no real leaders of the disenfranchised have emerged.

In the stock market, I have created characters that represent the cyclicals and non-cyclicals of the U.S. Economy.

This economic Modern Family mirrors the disconnect we see around the world.

Let’s check in on their progress or lack thereof this week.

As advances in technology and productivity continue, a lot of those gains are going to the top or the wealthiest, bypassing the lower and middle classes.

All one has to do is look at the chart of Semiconductors versus the charts of the small caps, transportation and brick and mortar retail.

The mirror image of the world’s discourse is remarkable.

Beginning at top left, the Russell 2000 IWM, closed DOWN week to week. DOWN! Let that absorb in your bullish brains.

Plus, the April highs stand above as a reminder of the weakness in the manufacturing sector.

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