To put it bluntly, U.S. companies are doing exceptionally well at the moment.
The following charts and commentary from Bespoke Investment Group tell the story:
Now, with that said, when I settle back in this week from a short vacation I’m going to offer up a message that should have you quelling — just a bit — your short-term enthusiasm. In essence, the above (what it says about the state of the economy), along with much of the current economic data, suggests that if the market (last Friday and, as I type, today) is indeed rallying on the media’s narrative — that stocks are gaining due to interest rates pulling back (the 10-yr treasury has retreated from its 2.9+% level of a week ago) — then, frankly, its rallying on the wrong thesis; leaving it exposed to similar-degree declines as rates ultimately resume their churn higher.
Coming setbacks — should they occur — however, would not be setbacks to sweat. If indeed the stock market (participants in the aggregate, that is) is yet taking its cue from interest rates, we should expect some notable downside action as it resigns itself to interest rate reality (could be tough to do initially) and shifts its focus onto the prospects for earnings going forward (a bullish scenario).
I’ll have more texture for you in a day or so…
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