Stocks and Bonds Fall as Jobs Fuel Fed-Hike Bets

Kevin Gordon discusses a divergence in market breadth where few stocks outperform the S&P 500, but notes this has resolved positively in the past. He observes a split between attitudinal skittishness around mega-cap IPOs and behavioral bullishness in fund flows, suggesting room for sentiment to stretch further. Earnings breadth is present but concentrated, and the dominant client concern is AI's impact on the labor market, which he views optimistically.

Yields

implicit

Oil

Metals

USD

Charles Schwab 7.8
Asset Manager $890.00B
Kevin Gordon 9.0

Stocks and Bonds Fall as Jobs Fuel Fed-Hike Bets

ndx

The interviewee notes that sentiment has room to stretch to the upside, earnings support the market, and divergences in breadth have resolved positively, suggesting a cautiously bullish view on tech-heavy indices like the Nasdaq-100.

rut

The interviewee highlights weak breadth with few companies outperforming, which is more consistent with a sideways or corrective environment for small caps like the Russell 2000, though past divergences resolved positively.

Speaker1

Market breadth is weak with few companies above their 200-day moving average or outperforming the S&P 500, but this divergence has resolved positively in the past.

The percentage of companies outperforming the index on a rolling three-month basis is sub-23%, a level seen only in 2023-24 and before that in 1973, but 2023-24 was consistent with corrections, not a bear market.
There is active equity new issuance, including a large deal from Alphabet and many IPOs, indicating market activity.

Speaker2
Speaker1

Sentiment is getting frothy, but attitudinal sentiment from investors shows skittishness around mega-cap IPOs, while behavioral sentiment shows stretched fund flows into tech and semiconductors.

This mismatch suggests there may be room for sentiment to stretch further to the upside, especially before many IPOs come online.
Speaker1

Earnings have supported the market, with breadth in earnings growth across industries, but magnitude is skewed towards large caps.

The growth in earnings share for large caps has been justified historically, but reliance on a smaller share of companies increases risk if expectations are not met.
Clients express fear despite optimism, asking how to respond to skittishness.

Speaker3
Speaker1

Clients working with advisors show less fear, but newer retail investors exhibit skittishness around market drops and big moves.

Concern about IPOs being too hyped is present, but overall sentiment aligns with John Templeton's quote: bull markets grow on skepticism.
Clients are not embracing markets materially less, but the bigger concern is economic, specifically AI's impact on the labor market.

Speaker2
Speaker1

The dominant question from all age groups is about AI and the labor market, which I view optimistically, not expecting tens of millions of jobs to disappear.

SignalTube

markets at a glance