Market Notebook

Prices of US equities and bonds diverged last week, with equities moving higher and bonds moving sharply lower.

From a technical analysis perspective, equities appear to be in a short-term upward trend, with SPY closing above the 20-day exponential moving average and the 200-day simple moving average. Longer-term, equity prices could be considered to be within an approximate consolidation range between the January 4th highs in ticker SPY and the February 24th lows.

While the recent strength in equity prices is welcome news, it seems unlikely that market participants are accurately pricing in the ongoing dislocations in the global real economy. Supply disruption and inflationary concerns still exist, with little clarity about how they will resolve. Recent price action appears to resemble a momentum chase rather than an all-clear signal.

From an investment perspective and over the short term, market technicals win the debate, and thus it appears optimism is warranted, but with caution. If one has equities on one’s buy list for the coming week, consider using position size to limit risk.

Bonds appear to be in a strong downward trend. Inflation concerns appear to be captaining the boat with increased default risk acting as the first mate. It seems prudent to avoid bond purchases for the time being unless absolutely necessary.

For myself, in the coming week, I intend to remain optimistic but will proceed with caution.

Starting with this market notebook, which is number 300, I intend to record and make available an audio version of the weekly discussion. A mini-podcast, if you will. It will take some time to get the distribution up and running, so I will point out where to find it when the time comes.

Finally, since there will be an audio version of this discussion floating out there without the written disclaimers, I will add a disclaimer to the end of each discussion.

All the best in the week ahead.

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.