According to Bloomberg over $6 trillion in market capitalization has been added the S & P 500 in 2023, an advance primarily focused in MSFT, NVDA, META, GOOG, AAPL, and AMZN.
Goldman writes that hedge funds are holding their most concentrated wagers than anytime in the past 22 years, a concentration focused in the names above.
Goldman further writes that with such great concentration, the markets are “extremely imbalanced that could potentially cause a sharp decline if everyone attempts to sell these names at the same time.”
About one month ago, the NASDAQ 100 was in correction territory. Today it is around a 22-month high. The advance is predicated upon the prevailing view the Federal Reserve may pivot perhaps as early as March. The markets have already priced in a 50-bps reduction at the July FOMC meeting.
About one month ago, following a “disastrous” 10- and 30-year Treasury Bond Auction, the narrative was rising that a “six handle” for these benchmarks was almost inevitable. Thirty days later, longer dated yields are down about 65 bps to a “mid four handle.”
Earlier in the month, Deutsche Bank commented that this is the seventh time the markets have expected the Federal Reserve to pivot since the inception of the current cycle in March 2022.
Speaking of the Fed, the Minutes from the recent FOMC were released. The Minutes indicated a cautious approach with all policy decisions remaining data dependent. Markets were unfazed by the remarks.
Perhaps of significance is that policy makers cited the fiscal outlook as a leading reason for the rise in yields on Treasuries. This contrasts with the stance taken by Treasury Secretary Yellen who stated that fiscal policy is not impacting longer dated rates.
Against this backdrop, can one perhaps conclude the odds favor higher long term interest rates given that Washington’s fiscal policy is one of spend and borrow and to heck with the possible consequences.
What will happen today? Trading is expected to wane throughout the day as the Thanksgiving Holiday approaches.
Last night the foreign markets were up. London was down 0.14%, Paris up 0.37% and Frankfurt up 0.37%. China was down 0.79%, Japan up 0.29% and Hang Seng up 0.79%.
Futures are flat. NVDA posted results after the close. The company exceeded expectations but warned that export restrictions on China would weigh on its fiscal fourth quarter. The 10-year is up 4/32 to yield 4.38%.
