“Christmas
in
July”
is
an
old
retail
promotional
gimmick.
On
Wall
Street
this
year,
it’s
looking
a
lot
like
July
in
December.
The
furious
recovery
rally
that
began
in
late
October
has
now
carried
the
S
&
P
500
almost
exactly
to
the
prior
closing
high
of
the
year
just
under
4,600,
set
in
late
July.
Financial
conditions
were
easing
and
investors’
collective
optimism
and
risk
posture
were
stretching
toward
18-month
highs.
In
the
final
run-up
to
the
late-July
peak
in
stocks
this
column
surveyed
the
rally
,
and
asked,
“Enough
for
now?
It’s
the
question
to
consider
at
moments
like
these,
with
the
stock
indexes
running
hot
and
investor
attitudes
swinging
from
decidedly
downbeat
to
downright
optimistic
over
a
matter
of
months.”
In
the
current
case,
that
swing
has
occurred
over
a
mere
five
weeks
—
all
of
them
positive
ones
for
the
S
&
P
500
—
for
an
aggregate
11.6%
gain,
its
best
run
over
a
five-week
span
since
the
week
ended
exactly
three
years
ago.
.SPX
YTD
line
The
S
&
P
500’s
year-to-date
performance
Yes,
the
market
is
overbought
by
various
technical
measures.
But
before
the
late-week
jump,
the
S
&
P
500
had
simply
hovered
in
place
for
10
trading
days
to
digest
a
three-week
surge
—
the
most
benign
possible
way
to
consolidate
a
double-digit
ramp.
The
tape
rotated
rather
than
retrenched
over
that
span,
especially
after
the
cooler-than-expected
October
consumer
price
index
report
on
Nov.
14:
The
mega-cap
tech
leaders
slouched
a
bit,
and
the
laggard
banks
and
small
caps
rose
from
the
depths.
This
is
all
to
the
good
in
terms
of
technical
improvement
and
breadth
expansion
that
send
a
friendlier
macro
message
of
firmer
growth,
falling
inflation
and
sufficient
liquidity.
The
late
2023
run-up
vs.
July’s
heights
Something
will
probably
come
along
to
challenge
the
happy
setup
and
cool
off
a
sizzling
market.
The
return
to
the
heights
of
July
2023
invites
a
compare-and-contrast
exercise
of
conditions
now
versus
then,
to
handicap
whether
the
forces
that
triggered
a
10%
three-month
correction
have
reassembled.
In
late
July,
as
now,
investors
were
rushing
to
embrace
the
potential
for
a
soft
economic
landing
scenario
that
they
had
so
recently
found
farfetched.
The
prevalence
of
the
phrase
in
media
coverage
has
tended
to
crest
along
with
stocks
this
year,
as
the
chart
below
shows.
This
is
only
a
problem
now
if
the
economic
data
starts
to
conflict
with
this
view,
or
if
Federal
Reserve
officials
deviate
from
their
recent
message
that
it
need
not
kneecap
the
economy
to
bring
inflation
to
heel
.
Investor
sentiment
has
brightened,
according
to
surveys
and
by
the
evidence
of
the
very
low
put/call
ratio
and
savage
squeezy
rallies
in
speculative
names
and
unprofitable
tech
stocks
last
week.
But
there
appears
to
be
room
for
bullishness
to
rise
a
bit
more
before
it
starts
to
sound
a
loud
alarm.
Here’s
the
long-running
Investors
Intelligence
poll
of
investment
advisory
services:
The
spread
of
bulls
over
bears
is
rising,
but
shy
of
mid-summer
highs
—
when
the
market
was
at
the
same
level
—
and
the
levels
typical
of
a
market
at
record
highs
in
2021.
Likewise,
Deutsche
Bank’s
consolidated
equity
positioning
gauge,
capturing
equity
exposures
across
multiple
investor
groups,
has
bounced
off
autumn
lows
but
remains
well
shy
of
the
peak
July
reading.
It’s
fair
to
point
out
that
some
recent
2024
outlooks
from
Wall
Street
strategists
contemplate
more
upside
than
was
the
case
a
year
ago.
Back
then,
the
debate
over
whether
the
October
2022
index
low
would
hold
was
a
spirited
one,
and
“Don’t
fight
the
Fed”
was
delivered
as
a
four-word
cold
shower
to
would-be
bulls.
Still,
while
the
10%
to
12%
S
&
P
500
gains
seen
by
Deutsche
Bank
and
Bank
of
America
seem
generous,
in
a
typical
year
this
would
be
a
fairly
unremarkable
sell-side
forecast.
They’re
countered
by
Goldman
Sachs
and
Morgan
Stanley
.
Meanwhile,
Wells
Fargo
and
Barclays
are
seeing
the
S
&
P
500
as
dead
money
next
year,
at
best.
Because
corporate
earnings
have
come
out
of
their
multi-quarter
trough
and
forward
estimates
for
the
next
12
months
are
again
rising,
the
S
&
P
500
at
4,600
now
is
less
expensive
than
it
was
at
4,600
both
two
years
ago
and
in
July.
The
equal-weighted
version
of
the
index
is
a
few
notches
cheaper
still.
Taken
together,
this
all
suggests
that
conditions
today
don’t
indicate
an
acutely
fragile
market.
It’s
worth
recalling
that
after
the
July
peak,
all
that
might
have
been
“needed”
was
a
routine
3%
to
5%
pullback
to
reset
the
tape
and
dial
down
the
trader
greed
a
bit.
This
is
just
what
unfolded
into
mid-August,
after
which
a
runaway
surge
in
bond
yields
stoked
panic
about
a
higher-for-longer
Fed,
stickier
inflation
and
heavy
Treasury
supply
.
Then
—
with
oil
whistling
higher
and
seasonal
patterns
for
stocks
posing
a
challenge
—
the
shock
over
the
conflict
between
Israel
and
Hamas
delivered
a
further
psychological
blow.
In
other
words,
a
succession
of
things
broke
the
wrong
way
to
create
a
deeper
correction,
taking
small-cap
indexes
to
the
brink
of
breakdown,
and
nicely
pulling
back
the
sentiment
slingshot
far
enough
to
snap
the
market
higher
last
month
as
yields
retreated
fast
and
financial
conditions
eased
the
most
in
40
years,
according
to
Goldman
Sachs.
The
rally
has
broadened,
but
what’s
next?
The
broadening
action
of
the
latest
leg
of
the
rally
has
answered
many
pleas
of
stock
pickers
humbled
by
a
hyper-concentrated
index
leadership
this
year.
The
spread
between
the
“Magnificent
Seven”
Nasdaq
giants,
which
include
the
likes
of
Nvidia
and
Meta
,
and
the
average
stock
is
wide
enough
in
performance
and
valuation
to
allow
for
such
a
dynamic
to
play
out
for
a
while
—
perhaps
at
least
through
the
usual
”
January
Effect
”
phase
when
underperformers
tend
to
catch
a
bid.
NVDA
META
YTD
line
Meta
and
Nvidia
YTD
However
it
goes,
take
a
moment
to
credit
the
index-fund
purists
for
profiting
this
year
by
holding
a
portfolio
that
almost
no
active,
discretionary
manager
would
run:
Allowing
Apple
and
Microsoft
each
to
rise
above
7%
of
the
book,
sitting
by
as
the
top
seven
holdings
pushed
toward
a
30%
weighting
and
not
selling
a
share
of
Nvidia
as
it
tripled
in
price
and
added
$800
billion
in
market
value.
The
virtues
of
owning
the
S
&
P
500
passively
have
always
been
low
cost,
tax
efficiency,
low
turnover
and
broad
exposure
to
the
asset
class.
Few
also
credit
indexing
pioneer
Jack
Bogle
with
creating
a
structure
that
enforces
the
ultimate
trader’s
discipline
to
let
your
winners
ride
and
trim
your
underperformers.
On
the
whole
breadth
debate
now:
There
have
been
many
complaints
for
so
long
about
the
dominance
of
the
mega
caps
and
much
lip
service
being
paid
to
the
supposed
virtues
of
a
more
inclusive
market
that
I
have
to
wonder
whether
the
market
will
at
last
oblige
the
majority
by
making
stock-picking
more
fruitful
for
a
while.
On
the
other
hand,
the
market
has
been
changing
in
character
pretty
starkly
around
the
turn
of
the
year
as
of
late.
While
2021
was
a
Nasdaq
100
melt-up
year,
2022
was
the
mirror
image:
Big
Tech
got
blasted
and
the
equal-weight
S
&
P
500
held
up
better.
Then
came
2023
and
another
180-degree
turn
in
favor
of
the
heavyweight
index
names.
If
this
clear
but
hard-to-trust
annual
pattern
holds,
then
maybe
the
bank
stocks
and
beat-up
retailers
are
just
getting
started?
The
way
the
mood,
positioning
and
share
prices
have
shifted,
a
good
deal
will
have
to
go
right
to
keep
the
S
&
P
500
pointed
higher,
with
its
early-2022
record
high
about
4%
up
from
here.
Peak
yields,
peak
inflation,
peak
Fed,
peak
oil
prices
and
GDP
growth
moderating
from
a
5.2%
pace
last
quarter
toward
2%
now
have
properly
carried
the
market
higher.
Now
sights
are
set
on
a
potential
“peacetime”
Fed
easing
move
early
next
year,
even
without
the
economy
buckling
and
as
corporate
profits
grow
nicely,
in
the
manner
of
Alan
Greenspan’s
modest
“insurance”
rate
cuts
in
1995
after
an
aggressive
tightening
push
in
’94.
This
stands
in
the
mists
of
memory
as
the
rare
and
matchless
ideal
soft
landing
—
a
sort
that
is
very
much
worth
hoping
for,
even
if
it’s
too
much
to
confidently
expect.
Neither
this
scenario
nor
a
slide
into
a
recession
can
be
disproved
in
advance,
so
scares
and
gut
checks
will
come
along
the
way. The
Treasury-yield
slide
is
starting
to
look
like
a
short-term
overshoot,
a
buying
panic
in
bonds.
And
the
equity
market
could
stand
to
cool
off
to
avoid
overheating
in
the
near
term,
with
Friday’s
action
hinting
at
bears
capitulating
and
some
forced
rotation
into
unloved
sectors.
Yet
with
credit
markets
sturdy,
stocks’
technical
setup
improved,
few
obvious
financial
excesses
in
need
of
immediate
unwind
and
a
benchmark
index
that
has
spent
two
years
going
sideways
in
a
domestic
economy
that’s
grown
12%
larger
over
that
time,
it’s
unlikely
that
any
near-term
setback
from
here
would
be
all
that
deep
or
decisive.
