Yesterday was a quiet day heading into the two-day FOMC meeting and key inflation data. The narrative is rising about the concentration of the market.
A Bloomberg headline read “Great Bear Market in Diversification Haunts Wall Street Pros.” The Newswire quoted Morningstar data that out of roughly 370 asset allocation funds tracked by Morningstar, just one had managed to beat the index since 2009.
Cambria Funds was also noted as its data stated managed diversified mutual funds have underperformed the S & P 500 in 13 of the last 15 years, a stretch seen only once before in almost a century of data.
Bloomberg further writes “valuations on shares making up the S & P 500 Value Index are levels not seen since 2001, in the aftermath of the dot-com bubble bust.” It was also noted the difference between value and growth are at a record.
The environment will change but the question is as to when and what will be the catalyst, the answer to which may not be known until years after it has occurred.
Tomorrow is the release of the CPI. Currently the options market is pricing in a 1.3% to 1.4% move in the S & P 500 in either direction based on the data according to Citicorp. This is the largest expected move since March 2023.
JP Morgan warned that any positives in the CPI could be reversed by FRB Chair Powell’s post meeting press conference or vice versa.
What are the odds both will be a non-event?
Last night the foreign markets were down. London was down 0.74%, Paris down 0.89% and Frankfurt down 0.59%. China was down 0.76%, Japan up 0.25% and Hang Seng down 1.04%.
Futures are down about 0.25%. The 10-year is up 8/32 to yield 4.45%.
