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Weekly market Recap – July 3rd

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The material in each presentation has been prepared by the respective participant for informational purposes only, and does not, nor does it intend to, provide tax, legal, accounting, or investment advice. This information is of a general nature and does not address the circumstances of any particular individual or entity. You should consult a qualified advisor on your situation to answer specific questions.

2Q23 was a beauty!

  • AI “chatter” and the SPX are now perfectly correlated.
  • This could mean a new bubble has formed.

Apple’s Market Cap Reached $3 Trillion

  • As Apple soars in value, it is currently larger than all the IWM, the Russell 2000 Index. 
  • Is there such a thing as too big?  Regulators may start thinking so and if history is a guide, Apple may be in trouble. 

Overall Market Breadth is Trending Higher:

  • There is slow evidence that the “top heavy” performance of the S&P 500 is beginning to give way to a broadening, based on the number of participants over their moving averages trending higher since the beginning of the year. 
  • Closely watching this is important because it will gauge the over sustainability of 2023’s strong equity performance this year.

Leveraged Short Equity Bets in ETFs are Trending Higher:

  • Overall sentiment, gauged by leveraged long and short equity ETF flows, has been fairly divided this year, reflecting investor indecisiveness as to market direction.
  • Flows currently have began to move more to the short side, as investors add inverse market hedges given the strong run in the S&P 500 Index, which is currently less than 10% from its all-time highs and +23% since October.

The Technicals are Saying That Overbought Conditions Have Improved

  • The overbought condition that emerged in large caps by mid-June has been resolved, clearing the path for stocks to enter July on slightly better footing. 
  • The Russell 200 hasn’t had a strong a run as the S&P 500, but the recent test and bounce off its moving average support is a positive sign that it can maintain a more stable uptrend.

Cash Flows in Large Caps are Improving:

  • Cash holdings continue to increase among non-financial Large Caps, indicating these companies have a more stable financial cushion than previous quarters in 2022.
  • Free cash flow improved by 19% vs. the prior year and looks to continue higher, showing better financial health of companies.  Others would say they are preparing for harder times.

Vanguard closing in on Blackrock as the two continue to dominate:

  • With Blackrock at 33% and Vanguard at 29% market share, they continue to led the overall ETF space.
  • Competitors such as Drexion, ProShares, SPDR, and Investco make up for less than half of the rest of the ETFs outstanding. 
  • Much of it can be attributed to their massive investor base, which obviously would favor their own products over others.

Sticky Euro-Area Core Inflation to Keep ECB on Edge:

  • Euro-area inflation surprised to the downside in May, with both the headline and core readings falling.
  • This is good news for the ECB and supports our view that underlying inflation has turned a corner. Still, it remains early to lower their guard, as statistical distortions can send core inflation higher through summer months. 

Massive protests erupt in France:

  • The shooting death of an unarmed Algerian youth in France has led to tremendous civil unrest.
  • The policeman claimed the youth, who was driving, posed a danger to the public.
  • Many activists took to the streets to demand racial equality and end police violence.
  • President Macron called for calm, demanded social media get involved to block activist chatter, and many local towns have imposed “no demonstration” edicts until things calm down.
  • France has deployed 45,000 police, special forces, as well armored vehicles to quell the riots.

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