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The Year Of The Dragon. · ANGLES.

• 0:00
  SPEAKER_00: The Year of the Dragon, my weekly market review, February 11th, 2024.
• 0:07
  SPEAKER_00: This weekend we enter the Year of the Dragon on the Chinese calendar, which it appears traditionally signifies good luck, prosperity, strength and abundance.
• 0:16
  SPEAKER_00: Although the Chinese stock market is not really the place to look for much in the way of prosperity or abundance right now,
• 0:23
  SPEAKER_00: U.S. markets are hot, hot, hot, and that didn't change as we saw yet another week of gains across the board,
• 0:30
  SPEAKER_00: with significant new milestone reached by the S&P 500.
• 0:36
  SPEAKER_00: Federal Reserve Chairman Jerome Powell reiterated in an interview with CBS's 60 Minutes that aired last Sunday evening
• 0:43
  SPEAKER_00: that the Fed likely won't be ready to cut rates at its next meeting in March,
• 0:48
  SPEAKER_00: stating that the danger of moving too soon is that the job's not qualified.
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  SPEAKER_00: There was absolutely nothing new here.
• 0:56
  SPEAKER_00: This was no more than an exact echo of what he had told us all a few days earlier at his press conference.
• 1:03
  SPEAKER_00: But Treasury bond yields still jumped and stocks opened lower on Monday,
• 1:06
  SPEAKER_00: with small caps leading the downward charge,
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  SPEAKER_00: and the decline accelerated later in the day when two of Powell's influential Fed colleagues came out and said exactly the same thing.
• 1:19
  SPEAKER_00: Fed speak is clearly getting organized and in sync.
• 1:22
  SPEAKER_00: This continues.
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  SPEAKER_00: It continued on Tuesday when Fed officials were once more out in force,
• 1:27
  SPEAKER_00: reiterating the higher-for-longer company line that it would be a mistake to cut interest rates too soon.
• 1:34
  SPEAKER_00: If this Fed speak was intended to take some more froth out of stock markets, it worked for a while,
• 1:40
  SPEAKER_00: and Monday's decline resumed.
• 1:43
  SPEAKER_00: Later in the day, however, the dip buyers jumped back in,
• 1:47
  SPEAKER_00: and both the large and small cap indexes actually closed the day with small gains.
• 1:53
  SPEAKER_00: Concerns about the viability of embattled New York Community Bank Corp intensified,
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  SPEAKER_00: as it was cut to junk by the Moody's credit rating agency on Wednesday.
• 2:06
  SPEAKER_00: Equivalent lending institutions around the world,
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  SPEAKER_00: heavily exposed to their own mostly toxic commercial real estate markets,
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  SPEAKER_00: and not helped by contagion from the implosion of the Evergrande Group in China,
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  SPEAKER_00: are clearly experiencing problems too.
• 2:21
  SPEAKER_00: There was also a continued drumbeat of Fed speak throughout the day
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  SPEAKER_00: from even more central bank officials,
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  SPEAKER_00: expressing satisfaction with inflation trends,
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  SPEAKER_00: but playing down the likelihood of imminent interest rate cuts.
• 2:34
  SPEAKER_00: Even so, driven by steadier market interest rates and some more decent earnings reports,
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  SPEAKER_00: large cap and tech stocks shrugged it all off
• 2:43
  SPEAKER_00: and started to become magnetically drawn towards S&P 5K,
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  SPEAKER_00: the crowded option strike price,
• 2:51
  SPEAKER_00: and psychologically important 5,000 level for the S&P 500 index,
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  SPEAKER_00: getting to within five points of the symbolic milestone.
• 3:02
  SPEAKER_00: But like a teenager who is too nervous to approach their crush at the high school dance,
• 3:07
  SPEAKER_00: the S&P 500 spent Thursday frequently getting up close to the 5K level
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  SPEAKER_00: and then backing away,
• 3:14
  SPEAKER_00: before managing to land a brief kiss a minute or so before the closing bell.
• 3:19
  SPEAKER_00: It couldn't quite hold on to the high level,
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  SPEAKER_00: to close above the line,
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  SPEAKER_00: but still managed its ninth all-time record high of 2024.
• 3:27
  SPEAKER_00: Interestingly, this session saw the Russell 2000 small cap index
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  SPEAKER_00: suddenly bounce spectacularly from recent underperformance,
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  SPEAKER_00: up by over 1.5%.
• 3:41
  SPEAKER_00: S&P 5K was breached again on Friday morning,
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  SPEAKER_00: and this time the index held above that level for the rest of the session,
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  SPEAKER_00: recording its first ever,
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  SPEAKER_00: over 5K close,
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  SPEAKER_00: and obviously a tenth new all-time high of the year.
• 3:57
  SPEAKER_00: And it's only early February.
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  SPEAKER_00: The mood was cheered by the release of the annual audit and report card
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  SPEAKER_00: on the accuracy of the last 12 months' worth of retail inflation data,
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  SPEAKER_00: which confirmed the strong downward trajectory that we've been seeing for many months now.
• 4:15
  SPEAKER_00: The Russell 2000 small cap index followed through on its strong showing
• 4:20
  SPEAKER_00: from the day before,
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  SPEAKER_00: and was by far the best performing corner of the market again.
• 4:25
  SPEAKER_00: This is very positive for stocks in general,
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  SPEAKER_00: as it demonstrates a widening of the breadth of stocks participating in the rally,
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  SPEAKER_00: and a closing of the gap between large and small caps
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  SPEAKER_00: by means of the little guys moving higher,
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  SPEAKER_00: rather than by the big guys moving lower.
• 4:43
  SPEAKER_00: Oh, and by the way,
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  SPEAKER_00: Microsoft became the largest company in history by market value,
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  SPEAKER_00: closing the day with the market capitalizing,
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  SPEAKER_00: of $3.125 trillion,
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  SPEAKER_00: surpassing the previous biggest,
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  SPEAKER_00: which was Apple at a mere $3.09 trillion.
• 5:02
  SPEAKER_00: 2024 has started out with lots of noise.
• 5:05
  SPEAKER_00: Mixed messages from the first Fed meeting,
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  SPEAKER_00: yes to rate cuts, but not yet.
• 5:10
  SPEAKER_00: Its officials publicly taking to the airwaves,
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  SPEAKER_00: conflicting earnings reports from tech giants,
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  SPEAKER_00: bizarre jobs data,
• 5:17
  SPEAKER_00: all-time records tumbling all over,
• 5:20
  SPEAKER_00: Elon being Elon,
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  SPEAKER_00: a return of small bank concerns amid what is clearly becoming
• 5:27
  SPEAKER_00: a commercial real estate crisis around the world,
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  SPEAKER_00: China's situation going from bad to worse,
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  SPEAKER_00: Putin chatting cozily with the US media,
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  SPEAKER_00: and so on and so forth.
• 5:39
  SPEAKER_00: For all the noise and strange nuance that we are seeing,
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  SPEAKER_00: this bullish mantra is still intact.
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  SPEAKER_00: No hard landing,
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  SPEAKER_00: Fed cutting rates sooner rather than later,
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  SPEAKER_00: inflation declining,
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  SPEAKER_00: earnings growth holding up.
• 5:55
  SPEAKER_00: For this rally to reverse meaningfully,
• 5:57
  SPEAKER_00: one of those four statements must be proved false,
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  SPEAKER_00: and despite some rather head-scratching recent data,
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  SPEAKER_00: none of it was enough to even begin to do so.
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  SPEAKER_00: And as such,
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  SPEAKER_00: the S&P 500 continues to reach fresh all-time highs,
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  SPEAKER_00: pulling all the other indexes higher with it.
• 6:16
  SPEAKER_00: But we may be approaching an inflection point,
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  SPEAKER_00: and it's very important to keep in mind
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  SPEAKER_00: that the Fed is going to cut through the noise right now
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  SPEAKER_00: and focus solidly on what matters,
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  SPEAKER_00: the four core drivers of stock prices at the moment.
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  SPEAKER_00: Number one, solid economic growth.
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  SPEAKER_00: Number two, a Fed embracing the idea of interest rate cuts.
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  SPEAKER_00: Number three, falling inflation.
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  SPEAKER_00: And number four, growing corporate earnings.
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  SPEAKER_00: Again, until one of those drivers is shown to be broken,
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  SPEAKER_00: and they will be at some point, they always are,
• 6:46
  SPEAKER_00: then the momentum can easily carry this forward.
• 6:50
  SPEAKER_00: And that's why we're going to see this market even higher.
• 6:52
  SPEAKER_00: And yes, stocks are ripe for a 10% plus correction,
• 6:57
  SPEAKER_00: as and when one or more of those factors are disproved,
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  SPEAKER_00: but we're certainly not there yet.
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  SPEAKER_00: The burden of proof lies entirely with the bears,
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  SPEAKER_00: and so far they're not accumulating enough evidence
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  SPEAKER_00: to stop this rally,
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  SPEAKER_00: aside from a few overbought pullbacks from time to time.
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  SPEAKER_00: The risks are plentiful,
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  SPEAKER_00: but momentum can be a hard trend to fight.
• 7:20
  Thanks for watching.