Forget about the fact that the market just left nearly everyone in the dust with the sudden nature of this week's bottom.
Forget about the fact that we have had fund flows out of equities over the past few weeks that rival the financial crisis and Q4 2018.
Forget about the fact that everyone has been drinking the trade war kool-aid, not able to look past the rhetoric and faulty analysis that is cemented into the psyche of investors about the effects of a prolonged trade war between China and the U.S.
The patterns coming out of this decline, into what is now a full-fledged recovery are some of the best in recent memory. Everything from semiconductors to SaaS to financials looks like they want to grow wings and put on an exhibition of acrobatic flight.
All of this is taking place as interest rates have been pummeled by what is continued paranoia about the impending recession boogie man, built on a foundation of Wall Street analytical hysteria that is nearly identical to the faulty analysis that came with the Q4 mini-crash in the markets.
Something every investor is going to have to realize is that the long end of the yield curve has become a contrarian indicator. It was always said in years past that bond investors have greater insight into the markets than equities. Those roles have been reversed. Fixed income investors have been perpetually wrong about everything from the prospects of continued rate hikes to what is likely now the prospects of rate cuts along with the numerous recessions that were supposed to happen in each and every quarter going back a few quarters now.
The herd like move into fixed income securities has just become one more way of expressing doubt about the voracity of this bull market. It has nothing to do with the prospects for the economy or whatever seemingly sophisticated smoke signals one chooses to see in the distance.
So with bond investors once again getting it wrong, driving yields to some utterly ridiculous levels, this makes the earnings yield on the S&P 500 that much more attractive. 2% for 10 years on a treasury note just doesn't cut it with earnings growth at current levels.
With that said, investors have once again been led to the empty landscape that is fear of the unseeable and paranoia about the unknowable. The perfect landscape for bulls to stampede throughout the month of June.
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