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  • Scott Poore, AIF, AWMA, APMA

Never Gonna Give Up

Investors like to hold onto certain narratives, especially when they have invested heavily on said narrative. The reality is, market and economic data are changing all the time and narratives don't work in a rapidly changing environment. One has to be willing to adjust to new information or run the risk of dying by the narrative.

The "recession" narrative is struggling to maintain validity at this point and a bull market might be taking hold.

It reminds me of the 1987 surprise hit song, "Never Gonna Give You Up" by Rick Astley. The song garnered new interest a couple of years ago as it was featured in the 10th episode of season 2 of "Ted Lasso." Below is some interesting trivia about the song:

  • The song reached #1 on the music charts of over 25 countries in 1987, including the U.S. and the U.K.

  • While the song went 5 times platinum in sales in 1987 (platinum = 1 million), the song has remained incredibly popular. Since being loaded to YouTube, the video is watched 456,000 times daily, on average.

  • The video that is so popular took only 1 day to shoot. Even more amazing, the director of the video, Simon West, and Astley's manager got into a 2-hour argument about whether the singer's sleeves should be rolled up during the filming.

  • This song was written by the British production team of Stock, Aitken and Waterman. Rick Astley worked in their studio before hitting it big. It's reported that Astley served the team tea just before they penned what would become Astley's hit song!

"We've known each other for so long

Your heart's been aching but you're too shy to say it

Inside we both know what's been going on

We know the game and we're gonna play it

And if you ask me how I'm feeling

Don't tell me you're too blind to see

Never gonna give you up, never gonna let you down

Never gonna run around and desert you

Never gonna make you cry, never gonna say goodbye

Never gonna tell a lie and hurt you"

Here's what we've seen so far this week...

Debt Ceiling Drama. Fed speakers have been absent this week as the "blackout" period started at the end of last week to prepare for next week's FOMC

rate decision. All signs point to the Fed not hiking rates next week in a "pause" or "skip" - whichever you prefer. The Fed Futures have been consistently at 70%+ this week that there will be no rate hike next week. In fact, the June 2nd survey of

economists by Bloomberg shows that the majority believe the Fed is finished raising rates and that rates should be on the slow decline beginning next year. No one has a crystal ball, but if these economists are correct, consumers may be getting a some wind at their backs instead of in their faces.

Another sign that rates are likely done rising is the drop in the U.S. dollar. The dollar tends to move higher with rising rates and lower with declining rates - although, not necessarily in a one-to-one correlation. This week, the dollar is on track for the largest weekly loss in over a month on bets that the Fed is finished raising rates. We would expect markets to react negatively to a rate hike next week that contrasts strongly with what the market seems to be projecting.

Never Gonna Give Up. The bear market / recession proponents probably won't enjoy the following data points, but as we typically state, the data drives investment decisions - not a particular narrative.

Earlier this year, starting in March, the Nasdaq Composite Index (tech-heavy) started to move higher and diverge from the broader market & the S&P 500 Index. By the middle of May, the Nasdaq had risen 13%, while the S&P 500 had risen only 8%. Since the middle of May, the two indices are more evenly on pace. The primary reason for that is that market breadth has improved. The number of companies in the S&P, Nasdaq, and the Russell 2000 Index (small caps) has increased since the end of April.

For those that are speculating that the rise in the Tech sector may be premature, there's bad news for the bears on that front, as well. The forward price/sales for the Tech sector has risen sharply, indicating there could be more upside as multiple Tech companies have trimmed payrolls and running leaner as the consumer continues to spend.

The institutional money managers seem to be joining the party, as well. The percent of active investment managers adding to equity showed the largest increase this past week since January. The NAAIM Exposure Index jumped to 90.07 this week from 53.92 the previous week - an increase of more than 36 points. The Index increased 19 points back in January. The Index reaching 90.07 is also the highest the index has measured since November 24, 2021. There's reason for optimism for equities, assuming the Fed doesn't reverse course next week. Per usual, the Fed loves to take center stage, so don't be too surprised if the Fed finds a way to disrupt the positive momentum.

Here's the video of Rick Astley belting out his hit song for your viewing pleasure (with sleeves rolled up, by the way)...



The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.


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