The Tortoise Economy Vs. The Hare Market

Happy Bull Market Birthday!

Today is the ninth birthday of this equity bull market, a rather impressive run that has generated roughly 5x in returns within an economy that has grown at a yawn-inducing pace. As the third longest bull market in history, this is an impressive day in an otherwise unimpressive week in the markets. Even as the market rallies on less toothy tariffs and a better than expected February Employment Report, there are reasons contained inside today’s jobs and wage report signaling the all clear on inflation has yet to arrive.

On Monday the major equity market indices started off on a downtrend but then shifted to a more risk-on tone during the day as the markets shrugged off last week’s tariff tantrum with the Trump Administration’s softer talk. The major U.S. equity indices rose over 1% on the day as the VIX, gold, and silver fell. The bullish tone on Monday saw 29 of the 30 Dow components ending the day in positive territory, with Nike (NKE) the only stock to lose ground on an otherwise very bullish day. Ironically, Nike, a contender for our Rise of the Middle-Class investment theme, has been one of the best performing Dow stocks since last October.

Monday once again saw the Utilities Sector (XLU) ETF lead all other sectors, which is not typical when the market is bullish, nor is it typical to see the 10-year Treasury yield close higher on a bullish day for equities. We’ve noted this odd occurrence a few times before in the Weekly Wrap, and the frequency of this contradiction has our attention as does the yield curve, which is once again flattening.

Tuesday the international markets were more bullish as participants became more skeptical of tariff talk. U.S. equities closed in the green, but the gains were more modest than Monday’s, while the dollar lost nearly 0.5%.

Wednesday the markets were mixed with the small cap Russell 2000 lead the pack, gaining 0.8% on the day, the Nasdaq up 0.3% while the S&P 500 declined nearly 1% early in the day, but rallied back to close down just 1 point. The Dow lost 83 points. The VIX remains elevated while the US Dollar looks to be unable to muster momentum for a bullish breakout.