For the second consecutive day, the broad-based S&P500 posted new all-time highs overnight, with the “risk-on” trade dominating. The small-cap Russell 2000 advanced almost three times as much as its larger peers, illustrating the market’s appetite for risk after this week’s FOMC. The tech-based NASDAQ followed its cousin, the S&P500, to new highs last night, but a more than 4% pullback by Apple Inc (AAPL US) weighed on the sector – we moved more cautious towards Apple in Wednesday’s Portfolio Positioning report.
- As we often say, “Don’t fight the tape.” With US stocks making new all-time highs this week, we must remain bullish until further notice.
Bond yields, like other financial markets, tend to travel around six months ahead of the news, with local bond and US short-dated yields forming a low in anticipation of rate cuts as opposed to when central banks actually flagged a more dovish path. As we mentioned earlier, we believe Michele Bullock has a tough juggling act on her hands through 2024, but we have confidence that she will balance the economic data and rates.
- We continue to expect the US 2s to test 3.5% through 2024/5, and the Australian 3’s sub 3%, i.e. US yields are set to fall further.
