DC Lite #168

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1. PCE vs. rates. "We have a situation where interest rates stay higher to target components that interest rates have little impact on, thereby squeezing down harder than necessary on rate sensitive components."

2. HY fundamentals. "US HY spreads are justified by strong fundamentals, a resilient US economy and supportive technicals. Barring a strong downside catalyst, we think spreads will remain close to current levels for an extended period."

3. Stocks vs. bonds. "The S&P 500 Index is more positively correlated with bonds than it is with the stocks in the S&P 500."

4. Retail investor sentiment. Bullish AAII sentiment fell by the most since February 2023 this past week while bearish responses rose sharply.

5. R2K valuation (I). "Are small caps still cheap after the rally? On an absolute basis, no ... But small caps remain cheap vs. large caps, trading at a ~25% discount to history (relative P/E of 0.74 vs. the historical average of 1.0x)."