DC Lite #321

In partnership with

1. Freight demand. "The drop in tender rejections over the past week is highly concerning. A lot of the bullishness post-election among supply chain executives has turned into confusion and dismay. The biggest frustration is not understanding the end game. Business leaders are confused about what's next."

2. Unemployment expectations. "The big news in the UMich data was not inflation expectations. Look at what people are saying about the jobs market! Expected change in unemployment worst since the 2008 recession. No one is asking for a raise in this environment."

3. Negative wealth effect. "B/c households are massively OW stocks, the current 10% market decline has created a wealth shock equivalent to 12% of GDP. 10% corrections are typical (53 since 1950). But, wealth shocks are rare (13). The economy is more vulnerable to a stock decline."

4. Equity put/call ratio. Since the start of the secular bull market in 2009, whenever the equity put/call ratio spiked above 0.93 while the S&P 500 was at least 10% off its highs (as it did yesterday), stocks were higher 12 months later 100% of the time with a median return of 22%.

5. 90% upside volume days. "The chart below flags all 90% upside-volume days over the past three cycles. Today's flag is constructive, but note the big failure during the COVID crash and various false starts in 2022. Never a layup, is it?"

ICYMI

• Thu 3/13 #320: "Investors say they are pessimistic but are still invested aggressively"

• Wed 3/12 #319: "History shows that S&P 500 drawdowns are usually good buying opportunities"

• Tue 3/11 #318: "The street is as bearish crude oil as it was in March 2020 when planet earth effectively locked down"

• Mon 3/10 #317: "European stocks’ outperformance has gone a long way, but in the big scheme of things the recent move remains a blip"