What is this recent volatility telling investors? … six crypto CEOs make their case to politicians regarding regulation … bitcoin to $550,000?
This morning, we learned inflation surged 6.8% in November – higher than even the lofty forecast that experts predicted. It’s the fastest pace since 1982.
But rather than cratering, stocks are climbing as I write mid-afternoon. Of course, today’s gains – which could be erased by the closing bell for all we know – come after yesterday’s heavy losses.
Up and down, up and down…
If it feels to you like the market has been especially unsettled in recent days, it’s not your imagination.
The stock market has been more volatile during the last two weeks than it has at any other point during 2021.
That’s from our technical experts, John Jagerson and Wade Hansen, in their latest Strategic Trader update.
Below, you can see how this volatility has played out in the S&P.
In short, we went over a cliff beginning on Black Friday, only to stage a strong rally after the selling pressure faded.
The biggest drivers of the volatility have been fears of the new Omicron variant, a new, hawkish tone from Fed Chair Jerome Powell, and most recently, optimism about vaccine protection against Omicron.
Let’s jump to John and Wade:
So, what does all this tell us?
It confirms that Wall Street wants to be bullish on stocks but that it hates uncertainty.
***Why Wall Street wants to be bullish
Before we jump into more analysis, if you’re a newer Digest reader, John and Wade helm Strategic Trader. This is InvestorPlace’s premier trading service, combining options, insightful technical and fundamental analysis, and market history to trade the markets, whether they’re up, down, or sideways.
Back to their update for why Wall Street wants to be bullish on stocks:
First, it’s having a hard time finding decent yields anywhere else. The bond market certainly isn’t providing strong yields.
Just look at the charts of the 10-year Treasury Yield (TNX) and the 30-year Treasury Yield (TYX) below.
Figure 2 – Daily Chart of 10-year Treasury Yield (TNX)
Figure 3 – Daily Chart of 30-year Treasury Yield (TYX)
The TNX is only yielding 1.5%, and the TYX is yielding a shockingly low 1.9%.
If traders want yield right now, U.S. stocks are one of the only games in town.
For a bit more historical context, the chart below shows the yield of the 10-year Treasury dating back to 1980.
As you can see, we’re not too far above the yield’s all-time low, set in March of last year at 0.318%.
***What about the second piece of evidence suggesting Wall Street wants to be bullish?
Let’s return to John and Wade:
Wall Street is content with the earnings companies are generating.
The stocks in the S&P 500 continue to beat earnings expectations. All but two of the sectors in the S&P 500 (Utilities and Materials) saw more than 75% of their component stocks beat…
Read more:More Stock Upside Coming