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Morning Market Report: Feb. 12th, 2024

There were many articles over the Super Bowl weekend saying that stocks just did something they haven't done since 1972 - they rose in 14 out of 15 weeks:



"The S&P 500 has risen 22.1% over the past 15 weeks as of Friday’s close, the largest 15-week advance since a 22.5% gain during the period that ended Aug. 28, 2020, Dow Jones data show."


"The No. 1 factor that has driven markets higher during this period has been the Federal Reserve pivoting away from hiking interest rates, and toward holding them steady, or possibly cutting them later this year, according to Chris Zaccarelli, chief investment officer at Independent Advisors Alliance."



These were the largest two % gains to an all time high since Y2K. The last big gain was at the start of the pandemic amid record central bank stimulus. This latest massive gain is coming at the end of a two year tightening cycle on the belief that lower interest rates ALWAYS lead to higher stock prices. Unfortunately, as I've discussed recently, there was only one time out of seven in the past forty years (1995) when Fed rate cuts led to immediately higher prices. All other times stocks tanked into bear market first and then they rallied: 1987, 1990, 1998, 2001, 2007, 2020. We are to believe that the biggest win streak in over 50 years and the biggest return since the pandemic, foretells more gains.






Ironically, the only central bank that has been cutting rates in the past year is China and they have both the worst performing stock market and the worst performing housing market in the entire world. Below we see that China's 10 year yield has round-tripped back down to the March 2020 lows, meanwhile Chinese stocks are far below the March 2020 lows, back at the 2009 lows.


"The No. 1 factor that has driven markets higher during this period has been the Federal Reserve pivoting away from hiking interest rates, and toward holding them steady, or possibly cutting them later this year, according to Chris Zaccarelli, chief investment officer at Independent Advisors Alliance."


FR: I caution everyone who believes the lower rates equals higher stock prices delusion to rethink that fantasy before it's too late.





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