5/6 Daily Plan: Rebound Continues and Complacency Returns

Complacency is Back

Hi Everyone,

Stock market complacency returns as last week’s batch of economic data is once again increasing the odds of rate cuts later in 2024, with two 25 basis points of cuts for a total of 50BPs now being the consensus view.

We saw volatility crush with the VIX falling back into the 13-14.5 region after the weaker than expected jobs report where the unemployment rate ticked up to 3.9% and the number of jobs created fell short of expectations. Meanwhile jobs figures from the previous two months in February/March got revised lower by about a net amount of -22000.

Macro-wise, there is increasing evidence to suggest that the U.S. is heading towards stagflation.

On the earnings front, Apple’s latest share buyback plan helped to juice its stock.

Although Apple’s earnings were fundamentally soft, the company essentially injected a form of QE into the market with its 110B Share Buyback plan. Apple’s post-earnings rally is based on financial engineering and buys the company time for its product roadmaps to play out.

I think that Apple’s share buyback inspired rally is vulnerable unless its fundamentals begin to support its 27.5X Forward P/E.

Below, we’ll touch upon several market conclusions based on this environment.