E Market Briefing For Friday, June 15

Too-good-to-be-true can work tactically for a while but generally tends to lead to at least a period of volatility. So the appearance of everything in a lined-up formation to mount another leg higher, can be the finale of what is actually a rather 'old' trend, rather than the kick-off of anything new.  

The tariffs issued Friday won't alone be able to break the market but just being wary in what some view as a sweet-spot for the markets on a sort of continuing basis. For certain stocks, that were overdone on the downside or didn't really participate in this year's upward tech swing (yet), there is more possibility of gain, or at least resistance to decline if the S&P falters.

Some will say only a 'black swan' event can bring the market down and to me that's only partially the case. Mostly it's because leverage works until it doesn't, as they have enough clearance above the 50 & 100 DMA to keep this alive for the moment. But not infinitely, so a modicum of caution.  

It seems, based on leverage and commitment (see last night about even Warren Buffett in a higher-than-usual cash position), that most aren't even willing to contemplate anything significant ruffling the markets' feathers. So many are worried; but few are truly prepared for a volatile summer.

As the bull market staggers around, credit exhibits weakness; all monetary conditions are tightening and 'flash crashes' risk becoming the norm. One can avoid missing out on stellar returns from risk assets by being cautious.

However, most are unwilling to stray from benchmarks or get defensive as such; and that's fine; so long as they 'do like Buffett', and buttress liquidity. 

Meanwhile, one of the starkest examples of dimissing risk lies in the credit markets, as investors chase yield by embracing short-duration corporates, often including some of the riskiest junk debt. A ratio of U.S. junk yields versus high-grade counterparts has reached levels recalling the warning I gave in 2007 of a coming 'Epic Debacle', and other frothy periods.

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Gene Inger 2 years ago Author's comment

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Jared Green 2 years ago Member's comment