Talking about strong market technicals are all very well, but sceptics might ask: what about the fundamentals? It’s a valid question, says Ned Davis Research’s Ed Clissold, who says the gap between macro concerns and bullish technicals is one of the biggest he has ever seen.
Take inflation. Markets roared higher after July’s Consumer Price Index reading showed a surprise slowdown. However, less volatile measures of inflation rose, notes Clissold, so it’s too early to be taking victory laps just yet.
Similarly, the rate-sensitive housing sector continues to weaken, says Clissold, and further rate hikes are coming.
Thirdly, investors will have to contend with the slowdown in earnings “for a few more quarters”, he cautions. So should investors ignore the improvement in market technicals? Not so fast.
Owen Doyle: World Rugby should leave the lineout alone and fix the scrum
Oscars 2025: Was Adrien Brody’s speech the longest ever, was Conan O’Brien funny and eight other key questions
Anjelica Huston: ‘There was no shame to having fun with playing women of a certain age’
‘Where I come from, people don’t do medicine. It’s not on your radar’: how a new generation of doctors is being trained
“The kicker is that technicals lead fundamentals,” says Clissold, who says fundamentals always look “terrible at the lows”. The US economy may well fall under the weight of further rate hikes and other factors, he says, leading to stock markets falling to new lows, “but to dismiss technicals on macro concerns is ignoring market history”.
