Weekly Market Wrap, One Brick at a Time: Despite another flat week for stocks, volatility remains high with bears supporting the “2120” brick wall on the S&P 500 and bulls throwing wrecking balls at it. For the second week in a row, equities took their cue from bond yields. The correlation between the two asset classes has turned sharply positive in Q2 with stocks rallying (falling) upon pullbacks (backups) in bond yields. As such, it seems like bad economic news has become good news for stocks as soft economic data not only push back Fed rate hike expectations but a weaker US$ also acts as a reflation pulse. Otherwise, it is noteworthy to observe the S&P 500 flirting with new highs while US equities have become a consensus underweight among global money managers. What if the DXY which lost another percent this week remains weaker for longer and triggers a positive shift in sentiment toward US stocks? Following five months of consolidation, an important energy point is building. As our March 27 wire showed, mid-cycle episodes of US$ consolidation eventually pushed US equities into a higher range. Please click on the attachment to view Martin’s full commentary and his Chart of the Week.
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