“The vow that binds too strictly snaps itself.”
-Alfred, Lord Tennyson
All-time highs (again) for the SP500 (2395), Nasdaq (5904), and Russell (1413) as growth, inflation, and profits all accelerate on a year-over-year basis.
See – I didn’t even have to mention Trump’s name to explain why #ATH happened.
Oh Snap! I just mentioned him. Don’t people hate (or love) the guy? Why are they so infatuated with him either way? Why not just appreciate the New Orders component of yesterday’s #GrowthAccelerating ISM report instead?
Back to the Global Macro Grind…
Yep. Yesterday’s ISM report (a certain competitor of mine has been calling for ISMs to slow, for months now) for the USA accelerated to 57.7 FEB vs. 56.0 in JAN with New Orders ramping youge to 65.1 FEB vs. 60.4 JAN.
Post a big US Consumer Confidence reading of 114.8 on Tuesday (new high vs. 111.6 in JAN), the February data is officially en fuego. Those ISM and New Orders reports ripped to 31 month and 39 month highs, respectively.
So instead of talking Trump, let’s talk about snapping!
This morning, Snapchat (ticker: SNAP) priced at the top-end of its IPO range and will open with over $20 Billion in market cap. Is this the beginning of a whole new bull run in uberly “over-valued” IPOs?
On the deal itself, we did what the Old Wall can’t do (again) yesterday and hosted what we call a “Pre-IPO Black Book” conference call outlining the Bull/Bear debate on SNAP. Per our Internet/Media analyst, Hesham Shabaan:
“SNAP sentiment appears to be fairly mixed heading into the IPO according to reported investor feedback from SNAP's roadshows. SNAP's sharp advertising revenue growth over the LTM is feeding the longer-term monetization story. However, its recently waning user growth is casting doubt on its staying power (FB), and whether it will be able to grow past its elevated cost structure. Further, the absence of any voting rights against its optically-lofty IPO valuation is adding an extra element of caution to the story.”
For those of you who didn’t crush it in 1 and/or 1 buying “optically-lofty IPO valuations”, you should remind yourself what mistake you may have made back then:
A) When US growth slows, bottoms, and starts to accelerate…
B) You can see massively youge multiple expansion
And, again, since “valuation” isn’t a catalyst for a bubble market multiple to compress… you should probably focus your time and research efforts on the big causal factors that do – with the biggest one being GDP #GrowthSlowing.
What is the catalyst for US growth to slow?
A) Is it valuation?
B) Is it Fed tightening?
This is what I keep asking both myself and all of our clients. Since any market history student knows the answer isn’t A), the question really becomes what are the pre-conditions for the Federal Reserve to tighten too fast?
A) Inflation surprising to the upside
B) Growth (and employment) surprising to the upside
You get the point, right? For the Fed to “slow” the economy, the economy has to do what we’re calling for. Oh just snap on me (again)! I can handle it. But how much longer can the growth bears risk manage it?
Our immediate-term Global Macro Risk Ranges (intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.32-2.52% (bullish)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 5 (bullish)
XOP 37.22-39.59 (neutral)
RMZ 1152-1195 (neutral)
Nikkei 194 (bullish)
DAX 119 (bullish)
VIX 10.77-12.95 (bearish)
USD 100.85-102.21 (bullish)
EUR/USD 1.04-1.06 (bearish)
YEN 112.05-114.96 (bearish)
Oil (WTI) 53.05-54.60 (bullish)
Nat Gas 2.61-2.92 (bearish)
Gold 1 (neutral)
Copper 2.67-2.80 (bullish)
AAPL 134.50-140.22 (bullish)
AMZN 839-862 (bullish)
FB 133-139 (bullish)
GOOGL 840-860 (bullish)
BAC 23.98-25.52 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
