Takeaway: 51% said 1,800; 49% said 2,000.
The S&P 500 closed at a record high yesterday and is currently sitting at 1,900. But, as CEO Keith McCullough pointed out this morning, “Calling total US Equity Volume a cricket yesterday wouldn’t be giving it its due credit! On the “all-time-high” CNBC Dow cheers (RUT and QQQ are down -5% to -6% from their year-to-date highs) volume was down -10% and -31% versus one-month and three-month averages, respectively.”
We wanted to know what you thought, so we asked in today’s poll: What’s the next stop for the S&P 500?
At the time of this post, in a very close, neck-and-neck race, 51% said the next stop would be 1,800; 49% said it would be 2,000.
Those who believe it will drop to 1,800 say it’s due to “money flow and volume.” Additionally these voters said:
- “As the FED continues its taper the market will eventually crack and fall below 1800, the FED will have no choice but to un-taper, that is when it will get really fun!”
- “This tape is up on air as the market's new leaders are hiding places. No real mo mo leaders. Great divergences, sentiment sucks, Fed out of gas, economy has yet to prove it is catching on despite Fed, Fed is buying futures and shorting $VIX, etc, etc.”
- “We tested two leading and separate indicators (R-squared in the 90s) for S&P 500 earnings and the multiple. We're getting 1,500 on the S&P 500 if trends for either or both slow even modestly.”
- “I'm guessing that margin debt would begin to decrease as the risk/reward heading to $2000 isn't as favorable and margin debt gets expensive if we chop sideways. I'm showing overbought today on my system.”
- “The market may creep slightly higher but no strength to get to 2000. The new highs are by less and less each time.”
However, those who said it will go to 2,000 simply believe it’s a bull market:
- “This market just doesn't want to go down. Bad news, good news, it does not seem to matter.”
- “The world is addicted to stimulus, and all the weak global economic data is demanding of MOAR stimuli ...”
- “As much as I expect and want the S&P to correct, the market just doesn't want to break it lower. Honestly I don't even know what will cause the market to drop anymore. The path of least resistance just seems to be higher.”
- “The lower rates go the MORE bullish I get on stocks - the historical regression of rates to P/E ratios is inversely correlated so multiples can stay where they are currently - stocks will drop once ‘bubble’ talk is over - bubble talk has already moved investors to the side lines.”
- “There is no reality to this market. The Fed has and will continue to manipulate all markets. I believe they have also been buying the index funds. Don't say they can't. Just look at them buying indirectly the debt! There is always a way.”
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Headline Retail sales grew +0.1% sequentially while the Control Group measure (GDP input) declined -0.1% sequentially with electronics spending and the e-sales and dining-out proxies each decelerating on a MoM, YoY and 2Y basis.
The positive revision to the march data will help drag 1Q GDP back to positive territory but the early read through for reported 2Q growth is less sanguine – particularly in the context of consensus estimates which have increased ~20% over the last month to +3.3%.
Meanwhile, sales-to-Inventory ratio’s continue to peak despite the spread between nominal spending and nominal earnings growth re-expanding in recent months.
With wage growth running sub-2% and savings rates at a cycle low (& the very low end of the historical range) the upside to consumption growth over the immediate/intermediate term remains very much constrained, in our view.
In short, with the ~24% of the domestic economy that is retail sales off to an inauspicious start, consumption has some significant hay to bale in order to best rising consensus growth expectations and re-capture last year’s slope of growth.
With the dollar and 10Y broken and food/energy/housing inflation taking down a greater share of wallet, we're not convinced that consumption acceleration materializes.
Christian B. Drake
Takeaway: Last chance to buy what’s been working all year? Slow-growth-yield-chasing is where the performance is at.
In this excerpt from our daily macro call for institutional investors, Hedgeye CEO Keith McCullough and senior macro analyst Darius Dale talk inflation and why the Fed just has it wrong.