'The Trump Pivot' is what analysts are 'now' calling this move; spurred by a lot of 'superficially' native news on tariffs and geopolitics two months ago. That's my point, as everyone that's been bearish is being 'increasingly compelled' to 'change their tone'; and that's what I've recently been addressing as the S&P stretches into more extended overbought territory. They're 'now' bullish after an advance works into very extended territory; normally time to be concerned.

That doesn't mean it's just over. We can work higher; the Dollar can persist in a revived strengthening we've also talked about; and as noted yesterday; lots of the portfolio managers are paid, or get bonuses, based on 'performance' as 'marked to the market' over Quarters.. and they are missing-out this year from what I have talked about throughout the difficult tariff-induced panic and lots of ridiculous agenda-driven political discourse we mostly avoided influencing us.

So is it conceivable that a reaction to Moody's move late Friday is an effort to 'bear' the market to assist the very managers who missed the move to get an entry? I certainly hope that's not the case, but the thought crossed my mind.

As to 'low sentiment': it's more nonsense; almost like the Walmart story; focus on the short-term pain and higher prices; with expectation it leads to solutions and general stability, even prosperity, if things continue progressing. Sure, as it gets more overbought the big-cap leaders are limited with potential, and get higher degrees of risk; while small-caps with more leverage perform better.

This has been one of the more 'obvious' worry-walls to climb; and we certainly appreciated the uncertainty of it; but were disciplined and 'bought more' when so many (who should know better) were selling when blood was in the streets. And now they're talking bullishly after the move; and here comes Moody's to 'rain on the parade' so to speak; as we'll likely never know if it's orchestrated.

Now, I don't know if we'll get the 'tax reforms' passed in the House next week; but it's not impossible. And if so that momentum could help a post-Expiration revival; primarily presuming there's post-Expiration consolidation to start the week off, or worse 'if' the Moody's move is really capable of replicating history.

Market X-ray: positioning matters; and institutions have missed this move for the most part; and I don't understand that, as they should have known better; to-wit the Trump Tactics that required 'bark worse than the bite' given they all know how DJT behaves and how he actually wants to be 'well-liked'.

It doesn't matter if you like him or not (he's as difficult a human as I've known for years, basing that on Roy Cohn having been his mentor after U. Penn and of course that's where he got the mindset of always litigating ... plus dealing with the Long Island unions for so many years... they made him a tough cookie).

Anyway 'rates going up' might be something the market has trouble tolerating, but higher rates for the right reasons aren't catastrophic; and if 'real' incomes don't get pressured (adjusted for inflation); then you get what you know 'they' really want (an inflation-mitigated reduction in effective debt service costs).

After Friday's close, Moody's downgraded the U.S. (following S&P years ago) and it's a symbolic cut to America's credit rating; ideally just temporary impact, although ponder...from AAA to AA1....so this action requires respect, but not over-emphasis. I'm sure Sec'y. Bessent and POTUS will rail against this (did Moody's aim at them?); as it could be viewed as an effort to throttle sudden optimism on global trade deals (etc.) and promised progress; so we'll see.

To be cynical; there's too much optimism; Moody's steps in to stymie that; as Congress tries to raise the 'debt ceiling' even over the weekend, deflecting the credit merit reduction. Could stuff get more complex before Monday? Yes.

So tariff risks & inflation jitters still thrive; while 'worry wall' climbing survives.

(Above is exactly what I mean; poised to breakout; so will Moody's be spoiler.)

So maybe we get one sharp sell-off / shakeout, but since everyone will know that the gains from AI / Quantum / 'deals' etc. will follow; those very skeptical money managers who are now scorched if not entirely burned, will jump in. In a sense the tailwinds are already detectable; so it's why they flip the pitch by the bears, skeptics, and some possibly amusing short-covering squeezes too.

Increasing productivity; increasing profits; and looking behind the curtain, well beyond the tariff impact (limited) short-term; gives the market resilience that I have talked about through the catharsis earlier this year; saying 'don't short'; and recognize where this is eventually headed, not what was superficial. Now it's extended, so with so many flip-flopping back to optimism; I say: 'en garde', as least for Monday's start and we'll see how things unfold (many variables).

The stories about Apple and Tim Cook (not Tim Apple) battling Trump are of course ridiculous; and typical of what media is focused on. Apple can pivot to India (not the USA) for iPhone production; but probably won't be needed, as I believe a deal with China will keep the manufacturing of 'that' product in Asia.

It's India, China and Vietnam; and (here I concur with Dan Ives) 'not' New Jersey where iPhones will be made. We don't have the personnel staffing and no the iPhone assembling is too complex to be relegated entirely to robotics, at least not at this stage. So President Trump was alone calling for it to be made here; or saying that Apple planned to 'bring it here'. No, they were talking data-centers, computers (now some are assembled in California and Texas); but not iPhones. In this case it is Trump that needs to understand how this works; not Cook; and no $3000. iPhone nonsense. (I would like to see a $3000. iMac with a 32" display Tim.)

Bottom line: ambitious projects in the Middle East are headline reminders of where this is all headed; which presumably are the spoils of peace, not of war.

Post-expiration might be variable or sensitive to news of course; but generally if major surprises, earthquakes, fiascos etc., are avoided; we muddle higher in select individual stocks, more so than the uber-priced mega-caps; although of course some gains can be seen there (but the leverage remains smaller ones of course; in a couple cases even 'warrants', for those comfortable with that).

Keep in mind that as the flip-flop management crowd flips, you will also reach a level that S&P (probably NDX/QQQ) will be so extended that vulnerability is increased when (not 'if'), something always comes around to inhibit things. So if it's a 'bond market tantrum', that can be handled versus something military. I consistently recognize flexibility and not chasing; but having bought low; there is no reason to chase; just trend following without panting; fingers crossed.

This is more like a 'normal' market; and having viewed the 'tariff panic' as the anomaly (and by 'not' shorting it, but actually gritting teeth and buying); there really was not much of a bearish alternative at any point, as others now grasp.

One caveat to all this: S&P, more so than the broad market, is very expensive. Everyone needs to own everything in moderation, which is not the same as all the analysts or managers now flipping form bearish-to-bullish suddenly calling for higher prices. Price-to-book is near record levels; bordering even the .com era; but not as broad as that advance. Share buybacks sort of distort the true value of companies, and make price-earnings looks for favorable than reality.

Being optimistic here in an expensive S&P market is fine for undervalued or AI special situations, but chasing upside in the big-caps is lots more risky, at the same time it buttresses the psychology which helps this live-on for now. If they manage to slam the market at the behest of Moody's; it's like to provide an entry opportunity for the majority of skeptics that entirely missed the rally, by linear-thinking that looked at tariffs and panic at face value without thinking about the 'strategy', which was pretty clearly aimed at growing, not shrinking.

Just remember: Moody’s has now downgraded the United States credit rating citing concerns over increasing U.S. government debt. Last time it happened was August 2023. The entire market was hit before subsequently recovering.

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