December 2, 2018
Weekly Market Outlook
By Keith Schneider
US equites regained its footing this week led by the NASDQ 100 up +6.22%, recovering after last week’s indigestion. All key US stock indexes are once again up YTD.
Looking at the bigger picture, stocks have been overeating for quite some time, feasting on low rates and tax cuts while ignoring a volatile geo-political environment. Brexit, Trade Wars, riots in France, and Russian aggression top the list, but there is a lot more brewing.
Last week, we pointed out the selloff was a bit overdone short term and we expected a bounce. This bounce could continue in alignment with strong seasonals into the end of the year.
We still believe that this rally should be sold into once it stalls or gets too frothy, as longer-term momentum readings are poor. Other key metrics like High Grade Corporate and Junk Bonds are very weak relative to US Treasuries.
Additionally, both housing and oil remain under immense pressure. Defensive sectors such as Utilities, Health Care and Consumer staples still have the strongest 3 month returns despite this week’s huge rally. This is not positive for the longer-term picture.
This week’s takeaways are:
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