00:00Later this week, we will get additional readings on the economy with jobs data, we'll get inflation data, and then we also, of course, have a big week in terms of earnings with several mega cap tech names on tap. What do you think the stock market is most focused on right now?
00:17I think the stock market right now is focused more than anything else on momentum and the fact that there's a bit of an ironic trend going on right now and that the institutional investors are finding themselves chasing after the retail investor, the tail wagging the dog, so to speak.
00:36The stock market has not been focused on the economy for some time now, and I think that until we see this momentum, the flows into the market begin to recede, and we are seeing that on some levels in exchange-traded funds and mutual funds, but until we see a true reversal, I think right now the stock market is a reflection of momentum and flows.
00:58And do you think that momentum continues with Meta, Amazon, Apple, and Microsoft all set to report earnings? We've seen a lot of, you know, a resurgence really in the momentum in big tech, not necessarily in terms of Apple, but with some of those other names. Will that continue and will it continue to lead the market?
01:18Well, the bar is certainly set very high for the names that you've just mentioned, but I think as long as there are remote beats on earnings that we're going to see continued momentum, a lot of the big sell-side investment banks have been putting out fresh reports about, you know, unforeseen before in the history of the market all the way back to 1929, the level of concentration, where returns are coming from,
01:42and they're squarely inside of that smaller and smaller group of market leaders, and there's no reason to think, again, with the meme stock mania resurging, that there's going to be any pullback in momentum unless there are some serious disappointments.
01:58No reason to think that, but given the fact that you think the economy is in this quiet recession, and you're pointing to data that points to at least a slowdown, where should the market be trading right now, and where does it go from here?
02:12Well, I think it's going to be a buy the rumor and sell the news type of thing. I don't think the market's actually going to appreciate it if we wake up on September the 17th and find out that the Fed indeed is going to be lowering interest rates, because that will be a recognition, if you will, of the slowdown in the economy.
02:30And I think that will be the first wake-up call for stock market investors, if you will, and that is indeed how history has tended to play out when the Fed finally begins to concede to a slowing economy.
02:42The stock market does not appreciate it.
02:44So bottom line, between now and year-end, do we see more gains? Do we end the market higher or lower than where we are right now?
02:51I think we see a tremendous amount of churn, and one of the areas that we're directing our clients right now is increased volatility.
02:59I think if there's one area of the market that is seeing serious suppression, it's the VIX index, it's the credit, the move index.
03:06So I think that that is where a lot of the action's going to be, whereas there's going to be a lot of churn in the actual level of the stock market going forward.
03:14But again, it all comes down to mentality, momentum, flows, and these are very automated functions that control well more than 50% of the behavior in the stock market right now.
