Macro Is Still Messy
The macro picture for the US stock market is still messy, to say the least. The S&P 500 index is still stuck in a trading range; as I have argued, investors are waiting for clarification on three key catalysts:
Tech earnings. Starting this week, major tech companies begin reporting earnings. Investors will watch closely to see whether AI growth continues to accelerate.
The Federal Open Market Committee (FOMC) meets October 27-28. Investors, especially bond investors, are worried about inflation and believe the Fed may be making a policy mistake by not raising rates.
The midterm elections. As I have discussed numerous times, the fourth quarter of a midterm year and the following year have historically been a very good time to own equities. However, it is understandable if investors are worried about future ramifications, considering the current political environment.
Until we have a better idea of how these catalysts will play out, longer-term focused investors seem to be taking a wait-and-see approach, while short-term traders are trying to take advantage of short-term rotation in this sideways trading range:
Macro Rotation
The rotation between growth and high-beta stocks vs. value and low-volatility continues to favor the latter:
The macro picture is telling the same story. Momentum and relative strength in the growth areas of the market continue to get weaker, while large-cap value is still hanging on:
However, zooming in on the charts themselves, this rotation between growth and value may be about to reverse, again.
For paid subscribers:
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Today’s ARTAIS AI Universe Screen results, and why the model is still out of equities despite them