Hi all,
Since our last post on June 1st, the S&P 500 is down 2%, the Nasdaq 100 is down 8% (!!), but the Russell 2000 (includes small cap companies) is up 2%. This has the look and feel of a typical rotation out of the high flyers that led the market higher during the Spring months, into some bargains that were left in the dust as the myopia of AI and all things technology-related dominated the headlines. A look at the 52-week high list shows names like Coca Cola, Target, Allstate, and Johnson and Johnson. Remember these dinosaurs? I’d venture a guess that these companies hitting new highs is much more emblematic of the overall health of the economy than which open source AI model is passing the SAT with the highest score.
While the overall markets tread water into the end of the summer (and eventually the midterm elections), let’s take a look at a few charts of what we’re watching at the moment, to perhaps give us a few clues as to what may happen next.
- Are tech stocks in a bubble? Is it about to burst like the dot com crash? If we are, it doesn’t look much like the last cycle in terms of valuation. Chart courtesy of Merrill Lynch.
- According to Bank of America’s private client survey, cash levels as a percentage of assets under management are at historic lows. This is generally not a great time to be jumping in with both feet, given the money needed to push stocks to higher levels just isn’t there until we get a little more anxiety back into the markets.
- The final chart comes from Torsten Slok at Apollo, and although it’s last, it’s certainly not least. The percentage of American workers without retirement savings between 18-65 is nearly 50%. Sometimes it’s just nice to remember that you’re doing better than most!
I hope all of you continue to have a safe and happy summer. School starts soon!
– Adam