Investors are reaching for financials and consumer cyclical stocks as if a rollover in the business cycle has been permanently deferred. Monthly heatmap for the S&P 500 from Tradingview.
The Wall Street Journal’s Recession (within next 12 months) probability tracker has now been cut in half since early 2023. Source: Augur Infinity.
For example, the ‘shiny recession-free future’ memo is yet to be received by commodity markets. Bloomberg commodity index futures are still firmly in a downtrend, with large speculators barely beginning to cover large short positions (mainly in energies and grains if you drill down into the individual markets).
Russell 2000 (IWM ETF) versus Nasdaq 100 (QQQ ETF)
I give thanks to the market gods that I am not short any of the ‘Garbage’ portfolio currently as they just put in a 30% rip up in November and are now within reach (less than 4%) of the S&P 500’s impressive performance for the year!
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