Subscribe to receive this FREE daily commentary directly in your email
The S&P 500 closed higher, propelled mainly by Apple, while the equal-weight index ended the day essentially unchanged—highlighting the lone standout in an otherwise uneventful session.
Despite the upward move, the S&P 500 spent the afternoon stalled at the 61.8% retracement level, effectively revisiting Tuesday’s highs.
There were 121 more decliners on the NYSE today than advancers.
The 10-year minus 2-year spread is once again setting up for a potential upside breakout, opening the door for yield curve steepening. While the exact timing remains uncertain, the opportunity is clearly there if the breakout finally occurs.
I’ve generally maintained the view that the yield curve would steepen via a bear steepener. Considering rising inflation expectations and the recent uptick in the ISM Services Prices Paid index, a bear steepening remains my base case. However, that doesn’t rule out the possibility of a scenario where the steepening arises from a combination of the 2-year yield declining and the 10-year yield rising, particularly if stagflation concerns begin to surface.
The 30-year minus 3-month spread is in a similar situation, consolidating around 60 bps and positioning itself for a potential breakout.
The spread between the US 5-year and 5-year JGB contracted today and is nearing a breakdown below its August 1 low. The tighter this spread becomes, the more likely it is that USDJPY will continue strengthening against the dollar.
That’s about it for today
-Mike
Terms By ChatGPT
-
Equal-weight index: An index giving equal representation to all its constituent stocks, unlike market-cap-weighted indices, preventing larger stocks like Apple from disproportionately affecting the index performance.
-
61.8% retracement level: A technical analysis reference (Fibonacci retracement) representing a common resistance or support level where prices might stall or reverse.
-
10-year minus 2-year spread: Difference in yields between 10-year and 2-year U.S. Treasury bonds; indicates market expectations about economic growth and inflation. A positive and increasing spread typically signals expectations for economic growth or rising inflation (steepening yield curve).
-
Yield curve steepening: Occurs when long-term bond yields rise faster than short-term yields, often reflecting expectations of future inflation or economic expansion.
-
Bear steepener: A yield curve steepening scenario driven by rising long-term yields faster than short-term yields, typically occurring during periods of inflation fears or increased government borrowing.
-
ISM Services Prices Paid index: An economic indicator reflecting price changes paid by service providers, often used as an inflation signal.
-
Stagflation: Economic condition characterized by slow economic growth and rising inflation simultaneously.
-
30-year minus 3-month spread: The yield spread between 30-year Treasury bonds and 3-month Treasury bills, another indicator of market expectations on long-term growth and inflation.
-
US 5-year and 5-year JGB spread: Yield difference between U.S. 5-year Treasury bonds and Japanese 5-year government bonds, affecting currency exchange rates, especially USDJPY (U.S. dollar vs. Japanese yen).
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
Subscribe to receive this FREE daily commentary directly in your email
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
Volatility and Liquidity Dynamics Reflect Late-Cycle Stress
Mott Capital's Market Chronicles 5 hours ago