Not that long ago, the economy was on the brink... The "Liberation Day" tariff announcement was brand-new. Markets were crashing. And economic warning signs were popping up everywhere you looked.
Editor's note: Today, we're turning things over to our friend Brett Eversole... Regular readers will recognize Brett. He's an editor over at our corporate affiliate Stansberry Research. And we've often shared his insights here in the Chaikin PowerFeed. Today's essay is adapted from the June 17 edition of Brett's free DailyWealth e-letter. In it, he shares how a recent big shift in one corner of the market points to upside ahead for stocks...
The Bond Market Gives the 'All Clear' Signal
By Brett Eversole, editor, Stansberry Research
Not that long ago, the economy was on the brink... The "Liberation Day" tariff announcement was brand-new. Markets were crashing. And economic warning signs were popping up everywhere you looked. One of the most worrisome warnings came from the bond market. Interest-rate spreads were exploding. And as I explained to DailyWealth readers on April 24, that was a terrible sign... if it kept going. This dangerous trend has reversed, though. The bond market's warnings are all but gone. And that means you don't need to stress about the rebound that's underway. Let me explain...
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In times of market stress, there's one place you can look for direction: the bond market. Stock investors panic at any sign of trouble. But bond investors only worry when the storm clouds are worth paying attention to. Folks were right to be scared in early April. The bond market showed that a horrible economic situation could unfold in front of our eyes. But recently, that has changed...
Interest-Rate Spreads Moved Back to Normal
The big indicator at the time was the interest-rate spread between risky high-yield bonds and risk-free U.S. Treasury bonds. When this spread spikes, it means bond investors are worried about defaults on risky bonds. And that only happens when a recession is imminent. Thankfully, the clouds lifted. This interest-rate indicator – known as the high-yield bond spread – recently fell back to a more normal level. Take a look...
The high-yield spread soared from 2.6 percentage points to 4.6 percentage points in a matter of weeks. The bond market was in a crisis of confidence. The real danger was that spreads might keep soaring... But they didn't. Instead, as the chart shows, they fell back below pre-Liberation Day levels. That's because folks have been buying bonds again. The chart below shows mutual fund and exchange-traded fund ("ETF") flows into bond funds by month. These flows went hugely negative in April as investors panicked... Then, they rebounded in May. Take a look..
Investors have bought bonds like crazy in recent years. But that ended during the April panic, when we saw about $52 billion in outflows. That was the fifth-worst month for bond flows since the data began in 2013. But we saw a sharp rebound in May, with an inflow of $58 billion. The data tells a clear story... The tariff shock spooked bond investors and threatened the economy. But those investors aren't worried now. The "smart money" recently moved back to buying. Of course, that doesn't mean new problems won't arise in the future. But the red light we were getting from the bond market is gone. That means we don't have to worry if the stock market rebound is a false move higher. Instead, we can trust the rally – and get bullish. Good investing, Brett Eversole Editor's note: We've seen big swings in stocks and the economic outlook recently. And amid this environment, Chaikin Analytics founder Marc Chaikin just went on camera for a big announcement... During a special presentation, he shared the details of the most lucrative new investment vehicle he has discovered in 50 years on Wall Street. And as he explains, it could double or triple your money on multiple occasions over the coming months. This vehicle represents fewer than 3% of public companies. And historically, it has worked especially well in the kind of choppy market we've seen recently. Get the details from Marc right here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.94%
8
15
7
S&P 500
+0.5%
122
252
126
Nasdaq
+0.34%
27
54
20
Small Caps
+0.03%
569
941
375
Bonds
-0.64%
Consumer Discretionary
+1.67%
5
25
21
— According to the Chaikin Power Bar, Small Cap stocks have become somewhat more Bullish than Large Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+4.71%
Information Technology
+4.25%
Consumer Discretionary
+3.75%
Financial
+3.14%
Industrials
+3.1%
Materials
+1.7%
Health Care
+1.0%
Utilities
+0.68%
Consumer Staples
-0.58%
Real Estate
-1.7%
Energy
-4.14%
* * * *
Industry Focus
Homebuilders Services
3
19
13
Over the past 6 months, the Homebuilders subsector (XHB) has underperformed the S&P 500 by -9.53%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #19 of 21 subsectors and has moved up 1 slot over the past week.
Indicative Stocks
WSM
Williams-Sonoma, Inc
CSL
Carlisle Companies I
HD
The Home Depot, Inc.
* * * *
Top Movers
Gainers
NKE
+15.19%
BA
+5.91%
EQIX
+5.31%
RCL
+4.6%
HWM
+4.55%
Losers
PLTR
-9.37%
COIN
-5.77%
ENPH
-4.93%
NEM
-4.11%
INCY
-3.45%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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