The markets have been resilient since my last post. After a brief dip earlier in the year, we are now a whisker away from new all high on the SPX despite all the hand wringing about tariffs. What happened on that dip was a mini-reset in sentiment probably as a result on the tariff drama and Trump's antics. I've had several clients express concern about Trump. My clients are Canadian of course, and I would say most Canadians despise Trump. I tell my clients what I often say here which is that the market is already aware of widely held concerns and thus will typically discount it quickly. It's the unexpected bad news which cause the big corrections/bear markets. Tariffs were largely anticipated from day 1. Yes, the degree of the tariffs were not necessarily fully factored in as there is some expectations that Trump was going to go in hard initially and then back off as a negotiation tactic. This appears to be playing out and is perhaps why the market didn't tank more than it did earlier this year. If however,a tariff war escalates a lot more than what's presently being expected, it will likely create market turbulence again.
We now have a situation where the market is a stone's throw away from new all time highs, yet AAII sentiment is almost 2:1 bears vs bulls with some other indictors also showing room for bullish animal sprits to rise such as BofA bull/bear indicator at a neutral 4.7. No, it's not all all clear as other indicators are showing excessive bullishness. This is why I stated we saw a mini-reset in sentiment, not a full reset, but there's enough pockets of negative sentiment to provide fuel for a break out to new highs.
Probably the most recent significant news event was Deepseek. There's a lot of debate about it but from what I gathered, it's a gamechanger and is bearish for the AI hardware providers. There's a lot of debate as to how Deepseek's impact will play out. I saw one video of this guy show how he was able to use Deepseek on his own private, closed network at a minimal cost, thus avoiding the need for expensive cloud computing servers with data privacy exposures.
It appears we have a market that is edging. Just when I thought we were about to see a bullish euphoric climax, we instead saw sentiment back off just enough to keep the party going for a little while longer. I had mentioned in my prior post that 2 major pieces missing to mark a bull market peak is IPOs and margin debt. Both have been on the rise but are not at extremes, especially IPOs. Perhaps this is what we need to see before the ultimate bull market peak in is.
I've also see some quant studies which are pointing towards strong gains this year. So, does this mean I should ditch my bearish posture for 2025 and be bullish for 2025? It does suggest I be more open minded to this for sure. At the very least, it suggests I be more pragmatic and that the edging nature of the market suggests that the peak may come later this year or even next year. As usual, I will adjust if/ when the data suggests that I do. I have no problem being a flip flopper. Folks, this is not about picking a side and being loyal to it. This is not a fucking marriage. This is not a religion. This is about being on the winning side. Period. Fuck your ego, your pride and your dogma. Do what works to make money.
