Recent Publications

Weekly talking points and key visuals from NDR strategists' insights.

Over the last year, buyers of the levered Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL) have been astute market timers - generally buying dips and selling rallies. As the selling of semiconductor shares intensified this week, five-day inflows topped $1.8 billion on Tuesday - the highest since February 2021. Time will tell if their success continues with this most recent dip. Watch for large outflows if the downtrend continues to see if they've thrown in the towel.

Inventories were a positive contributor to Q2 growth. But factory material and supply inventories appear too high relative to finished product. This is a sign of excess inventories, which is a headwind to stocks.

Real GDP rose more than expected in Q2, led by stronger consumer spending and inventory restocking. Durable goods orders sink, driven by aircraft order cancellations. Jobless claims decline, a sign of continued robust labor demand.

Initiating coverage of copper with a neutral outlook. China's economic weakness continues to weigh on copper. Speculative money, sentiment, and mean-reversion indicators have moved to levels where reversals would be bullish.

Real Estate has outperformed as yields have fallen since the release of the June CPI report. Indicator evidence for the sector has improved but is far from bullish. If recent yield and price trends continue, we will likely close out our underweight of the sector in the coming weeks.

Downgrading cash from marketweight to underweight, shifting 5% to bonds. Still maximum overweight equities at 70%, with underweight allocations of 25% bonds and 5% cash. Watching composites, recession probability, yields, sentiment, earnings, and Watch reports. Correction more likely than bear market.

Contradictory policy proposals make it difficult to understand the net impacts on the economy. Vance's extreme policy proposals could result in stagflation. Americans have been spending an increasing share of their income on shelter, leaving less money for spending on other goods and services.

Biden's late withdraw is unprecedented, but there are five loose historical comparisons. The incumbent not seeking reelection has not prevented the second-half election-year rally. Earnings revisions are a bigger concern than politics over the near term.

Global shipping rates have quadrupled since last year. Although there are several reasons behind the rise, China is the main culprit. We do not see this causing another significant surge in global inflation, especially one of 2022 proportions, but it does point to goods prices becoming less disinflationary.

Led by services, Composite PMI hits highest level in over two years. Selling price pressures ease. Economic growth narrows slightly across states, but the risk of recession remains low. New home sales decline. Low mortgage applications suggest continued weakness in total home sales. Falling architecture billings point to feeble nonresidential construction spending into 2025. Goods trade deficit narrows in June, but still expected to weigh on Q2 GDP growth.

Datacenters should grow by nearly 10% thru 2030 due to the compute power required by AI and the massive amounts of data captured from internet users. New datacenters will need large amounts of electricity, and we take a closer look at Utilities that stand to benefit.

Sentiment for cyclical Growth sectors looks the most excessively optimistic. The sentiment message for cyclical Value sectors is more mixed, with Industrials and Financials the most pessimistic. Sentiment for defensive Value sectors is also pessimistic.

Home sales fall to lowest level this year. Unsold inventory picks up, which could benefit potential buyers. Richmond Fed manufacturing decline deepens, but services activity rebounds.

Last week saw a spike in the Value/Growth relative strength line following an improvement in technical indicators. However, we maintain a Growth bias in Europe given our outlook for slowing global economic growth and moderate long duration bias. We introduce a new European Value/Growth summary report and detail key indicators to watch.

When things that should have happened don't. When indicators exceed their "use by" date. When relationships break down. We provide examples of each.

CFNAI and diffusion index consistent with growth close to trend.

Fab Five Trend Component had turned bullish - now neutral. Many trend and breadth measures improved early last week. New breadth thrust from five-day advances/five-day declines.

Weekly talking points and key visuals from NDR strategists' insights.

Headed into a period of seasonal weakness, as investors digest earnings, they're confronted with rich valuations, political uncertainty, and rate cut "certainty". The ratio of implied volatility to realized volatility has spiked more than one standard deviation above its one-year mean, capturing rising fear. Additionally, our daily trading sentiment indicator is reversing from excessive optimism. All point to continued bumpiness at the start of the third quarter.

Policy uncertainty matters for stock market returns, but by no means does it come even close to being a significant driver. A Republican president and Congress has been one of the best scenarios for equity markets, likely due to lower taxation and deregulation. But the Republican Party of today is one that is much more isolationist, which could pose risks to the outlook.

LEI falls less than expected in June. Economic Timing Model points to continued growth. Philly Fed factory activity and near-term growth expectations strengthen. Initial jobless claims rise in the latest week, but still range-bound longer-term.

Growth sectors dominated during Trump's first term, but the immediate market response to his election-night surprise victory was a rotation into cyclical Value sectors. Leadership trends since the June 27 debate have also favored cyclical Value sectors. We have Financials on watch for an upgrade.

Downgrading U.S. dollar from neutral to bearish. Establishing neutral position on yen, bullish positions on euro and pound. Responding to composite model readings and reversing sentiment. Bearish dollar position supported by strengthening gold and currency breadth.

A wide array of recent data series, including PMIs and sentiment, point to a stalling recovery. Despite the ebbing macro picture, we still see recession risk as low. Our eurozone outlook plays into our narrative of slower global growth but no risk of sustained slowdown in the second half of the year, which is supportive of the current cyclical bull market in global equities.

The transmission of monetary policy has been much less effective in the U.S. than in other economies, resulting in an increase in our Credit Conditions Index over the past year. A big improvement in corporate liquidity led the way. The effects in the household sector have been mixed.

Shifting our tactical recommendations to neutral for large versus small and Growth versus Value. Reduced uncertainty around rate cuts and political leadership reinforces a bullish macro backdrop. The rotation triggered a bullish short-term technical signal and broke long-term breadth downtrends.

Led by manufacturing, industrial production rises more than expected in June. Multifamily sector boosts housing starts and permits. Lower mortgage rates spur some refinancing activity, but purchase applications remain weak.

We present seven potential "Trump Trades" -- five long and two short ideas -- that could gain momentum if Trump is elected.

The Fab Five Tape is bullish, while the Fab Five Sentiment Composite is bearish. Fund flows, put/call ratios, and NDR sentiment composites are showing optimism but not at levels seen at peaks in recent years. Look for reversals from optimism for signs the market is poised for a meaningful pullback.

Retail sales surprise to the upside, boosting projections of Q2 real GDP growth. Business inventories rise in line with sales, showing no need for price cutting. Builder confidence continues to decline, pointing to weaker housing starts in the near-term. Import prices little changed.

CCCs outperformed following the first Trump election. We could see a repeat this time. Watch for a steeper curve due to expected monetary and fiscal policies. Tech exceptionalism should thrive under Trump 2.0, supporting the dollar and keeping yields contained.

Implied volatility has receded significantly since the political uncertainty in June, supporting outperformance of European small-caps relative to large-caps. The market reaction to the U.K. election has been relatively sanguine. Both U.K. SMID-caps and Sterling have been strong since. However, political paralysis in France remains a drag on French investor risk appetite.

With breadth remaining divergent, equal-weighted ACWI tracking cycles more closely than cap-weighted index. August-September has tended to be the worst two-month period. Cycle Composite shows weakness starting in September.

PPI increases more than expected, led by services. Consumer sentiment declines, pointing to continued but slower economic growth. Inflation expectations ease. Disinflation on a bumpy path, but Fed still on track for one or two rate cuts this year.

Weekly talking points and key visuals from NDR strategists' insights.

Some of the latest global macro data we watch closely, including the global PMIs and our recession model, are starting to show softer growth in 2H. But the risk of a sharp global slowdown remains low. This is consistent with continued upside in global equities.

Thursday's cooler CPI should bring lower rates and rate-sensitive ETFs rallied including the iShares Home Construction ETF (ITB) which jumped 6.2%.

The Fed hit the jackpot on Thursday, with inflation easing further and the labor market remaining tight. Further inflation progress in Q3 should give the Fed more confidence to start easing policy in September. Subdued wage growth in the strongest sectors and little change in the pool of available labor suggest better balance in the labor market.

Headline and core CPI inflation ease more than expected, led by gasoline, vehicles, and shelter. Initial jobless claims decline, as labor market remains healthy. This keeps the economy on a path to soft landing and the Fed on track for at least one rate cut this year.

The combination of elevated market concentration and mega-cap leadership has meant fewer stocks have been able to beat the S&P 500 and their respective sectors. Less than 25% of stocks have beaten the S&P 500 for 10 of 11 sectors over the last six months. Far fewer stocks than average have even be able to top their respective sectors.

EM ex. China outperforming, supporting overweight allocation. EM benefits from favorable breadth, easing cycles and receding bond yields, with dollar weakness a potential positive. Forward earnings growth and relative forward earnings yields also bode well for EM. But potential in question given EM's risk-off status and relative performance during secular bull.

Despite concerns over the fiscal situation, the term premium remains in negative territory, well below its historical average. The lack of non-federal supply is keeping the term premium suppressed. Federal debt is just 30% of total debt.

Watch for a continuation of high beat rates and year/year EPS growth acceleration. The bar is high for the Mag 7, and the other 493 are expected to contribute. Second half estimates are calling for hockey-stick like growth versus the first half.

Goods prices face upward risks from rising commodity prices, rebounding manufacturing activity, and lean retail inventories. Dollar strength is a partial offset. This suggests the broad disinflationary path will remain bumpy and slow in 2H. A rate cut in September is in play, but inflation could delay Fed action.

Wholesale inventories increase in line with sales. Mortgage applications remain subdued.

We remove our Long Bitcoin position after our favorite short-term technical indicator turned bearish and the price of BTC broke below $61,000 -- triggering the stop-loss we set in April.

Low VIX and VVIX readings indicate investor complacency. Low equity market volatility has been associated with outperformance from high yield credit, leading to further equity gains, thereby creating a virtuous circle. Changes in the political landscape or the economic outlook could break the circle.

NFIB index rises in June to its best level this year. But it is still range-bound longer term, which is a headwind to growth. Wholesale used vehicle prices continue to decline, helping the broader disinflation trend.

First half returns and volatility imply a positive second half for European equities, but seasonal trends may see some weakness in Q3. European indicators have deteriorated somewhat, but the weight of the evidence still favours a bullish tactical outlook for equities. If sentiment becomes excessively bearish again, this could present a buying opportunity.

Increasing the U.S. to a marketweight 56% from an underweight 54%. Further reducing our underweight exposure to Japan to 5% from 7%. Fundamentals, technicals from U.S. and Japan support move. Reiterate buy on peripheral debt.

ETI resumes its decline. Points to slower payrolls growth ahead. Consumer inflation expectations ease.

The short-term trend is upward, but sentiment suggests that a lot of buying is likely satisfied. The cyclical trend is upward, but Big Mo Tape not confirming, breadth is now negative, and leadership is very concentrated. The secular trend is upward, but looks extended, as do valuations. Watch secular uptrend in breadth.

Weekly talking points and key visuals from NDR strategists' insights.

Led by government and health services, nonfarm payrolls post a solid gain in June. But big downward revisions to prior months confirm weaker labor demand in Q2. The unemployment rate edges up to a new cycle high, but still short of NAIRU and the Fed's longer-run estimate. Although the Fed will wait for more data, today's report keeps a September rate cut in play.

In March, copper broke above $4.10 resistance and quickly ran to over $5, fueled by short covering on U.S. exchanges. After a 50% retracement, it may be putting in a base around $4.50. BHP Group's failed $49 billion bid for rival Anglo American indicates acknowledgement of the need for new supply but a preference to buy it, not find it. That's likely an indication we're early in this cycle. If copper can maintain support in the mid-$4 range, it may be time to revisit the copper miners.

The S&P 500 is in its 11th-longest stretch without a 2% down day since 1928. The end of previous long streaks has been followed by mixed returns, but not the end of the bull market, on average. This is one of the hardest bull markets for stock pickers in the last 50 years.

Although layoffs remain low, job openings and hires have declined, as the labor market has cooled off and is in better balance. But some industries still face labor shortages. Latest data suggests limited progress toward slower wage growth and inflation, keeping the Fed on hold for now.

The Catastrophic Stop model entered July fully invested. The International Equity Core model is overweight China and the U.K., while underweighting Australia, Japan, Germany, and Switzerland. The Explore model favored Chile, Italy, Peru, Spain, and Sweden.

ADP payrolls, jobless claims, and layoff announcement trends point to labor demand easing. ISM Services PMI craters, while the S&P Global Services PMI climbs higher, creating uncertainty about the economic outlook. Vehicle sales decline, largely due to cyberattack. Trade deficit widens, partly reflecting a strong dollar. Factory orders surprise to the downside, pointing to sluggish manufacturing output growth.

The All-Country World ex.-U.S. Total Return Index declined over 5 basis points in June. The International Equity Core model is overweight China and the U.K., while underweighting Australia, Japan, Germany, and Switzerland. The Explore model favored Chile, Italy, Peru, Spain, and Sweden.

During June, global stocks outperformed U.S. bonds by more than 130 ba sis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Emerging Markets, Japan, and Europe ex. U.K., while holding below benchmark allocations for Pacific ex. Japan, the U.S., Canada, and the U.K.

During June, global stocks outperformed global bonds by more than 210 ba sis points. The model's equity allocation remains above benchmark weighting, with U.S. Large-Caps and U.S. Growth each receiving more than 20% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 5% weights.

The Fixed Income Risk Management model improved during the month and entered July with a fully invested allocation to fixed income sectors. The Fixed Income Allocation model had mixed leadership. U.S. High Yield, U.S. Investment Grade Corporate, U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are above benchmark weight, while Emerging Market bonds, International Investment Grade, and U.S. Floating Rate Notes are below benchmark weight.

The Bloomberg Barclays U.S. Aggre gate Bond Total Return Index gained just under 1.0%. The Fixed Income Allocation model had mixed leadership. U.S. High Yield, U.S. Investment Grade Corporate, U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are above benchmark weight, while Emerging Market bonds, International Investment Grade, and U.S. Floating Rate Notes are below benchmark weight.

The Catastrophic Stop model improved during the month and entered July with a fully invested equity allocation recommendation. Financials, Technology, Health Care, and Industrials are above benchmark weight. Real Estate, Communication Services, Materials, Energy, Utilities, and Consumer Staples are below benchmark weight.

The S&P 500 Total Return Index gained nearly 3.6% with the strongest performance from Cyclical Growth Sectors (Tech, Communication Services, and Consumer Discretionary). Financials, Technology, Health Care, Consumer Discretionary, and Utilities are above benchmark weight. Real Estate, Communication Services, Materials, Energy, and Consumer Staples are below benchmark weight.

Growth sectors drove the S&P 500 higher in June, with Technology finishing as the top-performing sector for the second-straight month. Much of the June strength for stocks was attributable to the tech mega-caps. Six Value-leaning sectors not only trailed the S&P 500 on a relative basis but had negative absolute returns during the month as well.

Increasing bond exposure to 105% of benchmark duration from 100%. Closing out overweight trade on loans. Bear steepeners, bullish models, and friendlier data all support an increase. Several event risks in the coming days could derail the trade.

Only nine themes outperformed the S&P 500 in June, the lowest number since January. Tech continued its dominance - all but two outperforming themes were Tech related. No Global Shock themes outperformed the S&P 500 in June.

Valuations continue to rise, boosted by mega-cap stocks. A broader measure of P/E is also showing overvaluation. Consumer sentiment is more subdued.

The Commodity Model remained bullish for the fifth consecutive month in July. Global economic growth and neutral sentiment support resumption of the commodity uptrend. However, recent breadth weakness and WTI trading at the top of its range temper our enthusiasm.

Risk-On/Risk-On Ratio revised in response to market's shifting responses to macro influences. Risk-On Index has far less commodity weight than in 2011 while Risk-Off Index no longer includes bond prices and currencies. Currently providing global bull market confirmation, RO/RO will warrant attention during the next correction.

Job openings-to-unemployed flat in May. Suggests the Fed to stay on hold for now.

To stop a weakening yen, additional policy steps in the form of higher rates need to be taken. Japan has made a lot of progress on inflation, providing cover to continue with policy normalization. We are looking to going more underweight Japanese bonds.

Market-cap weighted equity indices outperformed other asset classes in Q2. The dominance of a few mega-cap Growth stocks were reflected in style and sector relative performance, few stocks beating the S&P 500, and low correlations. Long-term bonds, Latin American equities, and developed European markets were the biggest losers.

The top-level equity allocation remains at 86%. Although global equity breadth deteriorated, the Baltic Dry Index's trend turned positive. U.S. Large-Caps and Growth each have over 25% weightings.

Both ISM and S&P Global Manufacturing PMIs show conditions remain fragile. Price pressures ease. Construction spending edges down.

Structural and cyclical factors have led to U.S. economic exceptionalism. Economic exceptionalism is intertwined with Tech exceptionalism. Long-term fundamental drivers of Tech outperformance remain in place.

Weekly talking points and key visuals from NDR strategists' insights.

Consumer sentiment little changed, and still consistent with continued economic expansion. Chicago business barometer rebounds, but other regional indexes mixed. State coincident indexes show low risk of recession.

Over the past six quarters CEO Confidence has shot up 22 points. This type of rebound has previously been seen only after recessions. The good news is that capex spending on Equipment & Intellectual Property tends to follow CEO confidence with a three-quarter lag.

All the increase in the labor force since the start of the pandemic has come from foreign-born workers. Since 2007, there have been more immigrants added to the labor force than native workers. The last time we saw payrolls growth significantly outperform household employment was during the last immigration wave in the late 1990s. The truth on the strength of the labor market lies in between these surveys.

Jobless claims fall, but overall trends show tightness easing. Pending home sales drop amid affordability concerns. Q1 real GDP revised up slightly, domestic demand remains resilient.

Upgrading Technology to overweight and downgrading Utilities and Financials to marketweight. Mega-cap strength and positive earnings trends support Technology overweight, but risks remain. Both Financials and Utilities could be re-upgraded in the 2H as the election and Fed easing draw closer.

Doubled the number of asset universes to include global and international options. Expanded date range options including a common start date. Added an excess return view for relevant fixed income universes.

Persistent pessimism toward the economy and stocks has been a key driver of the bull market. Much of the pessimism has given way to optimism or neutral views. The sentiment shift puts more of the onus on fundamentals for the bull market to continue.

In a defensive outlook, expect low-beta areas like Utilities and Energy to outperform. In a choppy/status-quo environment, expect themes with unique drivers like AI and Uranium to outperform. In a full risk-on scenario, expect beaten-up green themes to rebound most.

But mortgage applications climb amid lower mortgage rates in June. Nonresidential construction plans slump.

We raise our 2024 global real GDP growth forecast to 3.1% from 2.7% previously. The expansion will continue into 2H and recession risk will remain low, which supports the current cyclical bull market in equities. However, momentum will likely stabilize or even ease modestly amid some signs of peaking in global aggregate data and rising risks among many large economies.

The S&P 500's strong start to 2024 runs counter to election year trends. Candidate familiarity could be driving investor complacency. The VIX futures curve and Skew Index imply investor angst could rise closer to Election Day.

Despite the fall in confidence, the index remains at levels consistent with continued economic expansion. Existing home prices remain resilient amid tight supplies and long-term demand. CFNAI reflects pick-up in national economic activity in May.

Snap French elections have seen French yield spreads blow out to levels last seen around the 2017 presidential elections. Polls are predicting a hung parliament as the most likely outcome, a scenario that would likely see spreads narrow and limit further downside for French equites. The longer-term trend in economic policy uncertainty is broadly supportive of European equities.

The timing of the first rate cut matters because bonds rally in anticipation of that cut. The first cut is "consequential" because it implies a series of cuts. Although the journey has been delayed, the destination remains the same. Helped by a resilient economy, lower volatility, and carry, credit is hanging tough.

Big Mo Tape has not confirmed recent records for the popular averages, making a series of lower highs in Q2. Despite weakening, the composite has yet to turn bearish. Greater participation from defensive and cyclical Value sectors is needed if long-term breadth measures are going to turn bullish.

Composite flash PMI hits highest level since April 2022, led by stronger services growth. LEI continues its negative streak, signaling likely slower growth ahead, but no recession. Existing home sales continue to decline.

Weekly talking points and key visuals from NDR strategists' insights.

Nvidia (NVDA) is looking meaningfully overbought, measured by its 42-day (2-month) return recently exceeding 70% for only the fifth time in the past 20 years. Does that mean it's time to sell?

There is reason to suspect that some jobs data is being overstated. We explain why it's likely we'll see some downward revisions to payrolls. However, it's highly unlikely that the downward revisions will ultimately unveil an extremely weak labor market and/or recession.

Led by a cratering multifamily sector, construction activity declines. Falling builder confidence points to continued weakness ahead. Philly Fed factory activity and expectations weaken. Current and expected price pressures rise. Jobless claims edge down, but trend and continuing claims move up, a sign of easing labor demand.

The timing of Fed cuts, presidential election, and the resiliency of the economy should help drive 2H leadership. Given excessive optimism and valuations, positive earnings and revision trends will be essential for Growth sectors to maintain momentum. The sector model continues to lean towards Value sectors, but the spread has narrowed, and we could tactically add to our Growth allocation if the trend continues.

Watch for continued choppiness and potential correction with cyclical bull remaining intact. The third quarter may look a lot like the second quarter, with the year ending like it started. With bond yields declining, expect gold strength and a weaker dollar, to the benefit of EM and the detriment of Japan.

Second-half EPS estimates, Fed and election uncertainty, optimism, and breadth divergences leave the market vulnerable to a correction. As long as the soft landing and modest EPS acceleration remain intact, so should the cyclical bull market. The best chance for small-caps may come when the Fed cuts; watch Growth's earnings revisions.

S&P 500 Technology has returned 12% over the last three months yet the percent of companies above their 200-day moving average has dropped by about 11% points. In this publication we look for similar divergences within Tech themes. Like S&P 500 Technology, Tech divergences are often driven by strong Titan performance and weakness in Software. Big Data, 5G, Blockchain, Cybersecurity, Internet, Cloud and Work from Home themes are on our negative divergence radar.

China's latest data dump disappointed. If sustained, it presents risks to the relative strength of China's equity market. However, on balance, we're not seeing any major breakdowns in the data, which will continue to prop up global growth and keep the expansion intact. We maintain our view that China's long-term risks are tilted to the downside.

Retail sales come in softer than expected in May, partly due to lower goods prices. Industrial production jumps. Broad-based gains in manufacturing output. Business inventories keep in line with sales.

At $7.7 billion month-to-date, large-cap Growth ETF inflows are on pace for a monthly record. Mega-cap outperformance has pushed measures of sentiment into overly optimistic zones and suppressed realized volatility. Bonds broke-out to two-year highs, however, the long-term treasury yield decline appears stretched.

Political uncertainty in Europe has furthered a rotation into Defensive sectors and presents a headwind for Cyclical/Defensive sector performance in the near-term. However, the broad macroeconomic and market backdrop is still supportive of Cyclical sectors. The Utilities sector looks excessively cheap, explained by the long-term outlook for earnings growth, though there is not enough evidence to overweight the sector yet.

A number of key cyclical sentiment/valuation indicators from the Fed suggest high risk with people fully invested at high valuations. Nevertheless, other indicators of social mood show rather dramatic pessimism, which could give the bull market a longer time to justify our overweight position since late 2022. My guess is that the difference is between rich folks, who own stocks accounting for the excess optimism, and less wealthy folks, who have greater skepticism.

BEM flashes buy. Looking to add to exposure on weakness. U.S. has rallied hard, especially relative to Europe. Looking to increase exposure on weakness. Japan on cusp of major breakdown. Looking to further reduce exposure.

As record highs reached by major benchmarks, breadth has weakened. Benchmark records are not confirmed by most markets, sectors and stocks. Thrust signal from 30-day new high indicator would require substantial breadth improvement.

Consumer sentiment falls to a seven-month low. Inflation expectations remain elevated. Import prices decline, partly due to dollar strength.

Weekly talking points and key visuals from NDR strategists' insights.

Two major central banks, the ECB and BoC, cut their main interest rates last week. This puts our global central bank measure on the cusp of net accommodation, a bullish condition for equities. We introduce reports for the ECB and BoC that show performance of various asset classes after first rate cuts and entire rate cut cycles.

Following our U.S. Equity Team's upgrade of Growth over Value and large-caps over small-caps, we like AIQ's high correlation with growth (SPYG) and IBIT's (Bitcoin proxy) and URA's low correlations overall. Our long-term bullish view for millennial consumer spending remains. However, IEDI's modestly high correlations to small-caps (IWM) and Value (SPYV) could contribute to a downgrade should they strengthen.

Credit and financial conditions remain favorable for businesses and the stock market. Corporate debt/GDP is lower than pre-pandemic and the debt burden is historically low. High corporate liquidity implies low risk of financial stress.

Gold sentiment and seasonality suggest that more consolidation may be needed for a sustained recovery, along with continuing weakness in U.S. dollar and interest rates. Long-term outlook supported by supply/demand balance and long-term model. Commodity uptrend and gold/silver momentum also bode well for gold. Watch for buy signal from short-term model.

Shifting tactical allocation to Growth over Value from neutral and to large-caps from small-caps. Both Value and small-caps broke multi-year support relative to Growth and large-caps, respectively. Models are confirming, reinforcing secular trends.

PPI inflation eased more than expected in May, driven by lower energy prices. Pipeline price pressures, however, were mostly up, posing a risk to further disinflation. Jobless claims pick up, indicating some softening in labor demand.

Median participant only sees one cut this year, matching our expectations, but four next year, while longer run neutral rate moves up to 2.75%. The SEP surprised by showing an acceleration of GDP in 2H with higher inflation and no change in the unemployment rate. Policy to remain restrictive for longer.

Several breadth measures have deteriorated for Technology even as the sector has set new highs. Continued strength from the sector's mega-caps could allow time for more stocks to reestablish uptrends and resolve breadth divergences bullishly. Sector earnings revisions have been rising, but valuations adjusted for expected growth still look expensive.

Both CPI and core CPI came in softer than expected in May. Shelter remained sticky. The super-core and other measures of underlying price pressures eased, reflecting broadening disinflation. Continued moderation in inflation, even if it is timid, creates room for Fed rate cuts later this year.

It is difficult to know if this is just short covering or a true inflection point, but Pet Care has been a top-performing theme over the past eight weeks.

The median correlation for the top-10 S&P 500 stocks has risen to the highest level since August 1997. Analysts' buys portfolio has a high correlation with relative strength portfolio indicating performance chasing. Analysts' buys portfolio price/book spread is near all-time highs.

Housing is unaffordable for large swaths of Americans but varies widely by region. Supply will remain constrained due to the "lock-in" effect, demographics, and rising development costs. We estimate the U.S. is short between 800,000 and 2.2 million housing units.

NFIB index picks up in May, but still within its two-year range. Subdued business optimism suggests continued, but slow, economic growth.

In a close call, we expect the median dot to show one rate cut this year. The longer run neutral rate should drift up to 2.75%. The Fed should have a higher inflation target than the ECB.

ETI rebounds in May, pointing to continued payrolls and economic growth.

The Fab Five Tape is currently neutral. Breadth indicators are mixed, with some divergences. The uptrend in stocks remains intact.

Weekly talking points and key visuals from NDR strategists' insights.

After buy signal from earnings growth breadth indicator, model's equity percentage close to our maximum exposure recommendation. Earnings growth following last year's estimate and breadth of positive revisions. Most earnings beat rates above historical medians with positive year-to-year changes.

Sizable job gains exceeded the highest estimate from economists. AHE also exceeded forecasts. Unemployment rate edged up to the Fed's yearend forecast of 4.0%. But that was mostly due to people exiting the labor force, and not due to layoffs. This report suggests the Fed will remain patient and hold policy steady next week.

We believe the great disparity in sector returns is setting up Consumer and Physical sectors and related themes with large mean reversion potential, not unlike 2000.

I have been hopeful for disinflation toward 2% since the summer of 2022. Harmonized CPI inflation is 2.4% and core inflation ex-shelter is 2.1%. But we still need a softer economy - real disposable personal income, employment trends, real policy growth, economic surprises, and consumer expectations suggest that could be happening.

Jobless claims remain range-bound, suggesting continued low unemployment. Unit labor costs revised down. Trend suggests further disinflation and a tailwind to profit margins. Trade deficit spikes in April, a likely drag on Q2 GDP growth.

ISM services exports exceeded imports by a record 19.0 points. IG credit spreads could converge further to the level of CDS. Improving corporate liquidity and positive carry support spread convergence.

Investors are balancing between growing evidence of an economic slowdown and the implications for rate cuts. Moderating, but positive, growth would be the best-case scenario for stocks. Value and small-caps are near multi-year support relative to Growth and large-caps respectively.

Global growth accelerated to a one-year high, according to the latest global PMIs, amid signs that growth is broadening among economies and sectors. Along with other macro indicators, this is supportive of the current bull market in equities. Prices remain stuck above pre-pandemic, possibly reflecting a new normal.

The Services PMIs jump in May, consistent with firmer economic growth. Price pressures mixed. ADP payrolls growth moderates, a sign of some cooling in labor demand. Light vehicle sales rise only slightly in May. High financing costs and prices restrain growth. Mortgage applications fall, pointing to continued weakness in home sales.

Only 16 of 48 themes outperformed in May, the lowest level in four months. However, risk appetite was evident in several beaten-up themes such as Clean Energy, EVs, and Genomics. We need to see more evidence that the rally since late April is more than a just a bounce from being oversold in Q1.

The S&P 500 advanced 4.8% in May, marking the highest return for the month of May since 2009. All Magnificent 7 components but Tesla had a positive return in May, and the seven stocks contributed more than 60% of the index's return. Utilities kept its positive momentum going, gaining 8.5% during the month, second best among all sectors.

The ECB will most likely lead the Fed in cutting rates tomorrow, but this isn't necessarily bearish for the euro, and we have a neutral outlook for the currency. Historically, European equities have performed strongly following the first cut after a tightening cycle. And while inflation surprised to the upside last week, the longer-term trend remains supportive of equities.

Mega-caps dominate benchmarks' market-caps and are more overvalued than the rest of the market. The S&P 500 median P/E would need to fall 31% to hit its long-term median and 19% to reach its 20-year norm. Small-caps and Value are less overvalued than the median Growth stock.

Absent a sharp global economic slowdown, the environment for commodities remains supportive. Conditions that concerned us previously have largely resolved clearing the way for commodities to move higher. However, near term weakness in crude could weigh on the broader index if longer-term support does not hold and the downtrend strengthens.

Job openings fall to lowest level since early 2021, showing cooler labor demand. But layoffs also decline. Without a hit to unemployment, the Fed can keep rates higher for longer. Factory orders increase at a subdued pace, reflecting sluggish manufacturing activity.

The Catastrophic Stop model entered June fully invested. The International Equity Core model is overweight China, France, and Switzerland and underweight the U.K., Australia, Japan, and Canada. The Explore model favored Chile, Mexico, Poland, South Africa, and South Korea.

The All-Country World ex.-U.S. Total Return Index increased by almost 300 basis points in May. The International Equity Core model is overweight China, France, and Switzerland and underweight the U.K., Australia, Japan, and Canada. The Explore model favored Chile, Mexico, Poland, South Africa, and South Korea.

During May, global stocks outperformed U.S. bonds by more than 240 ba sis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Emerging Markets and Europe ex. U.K., while holding below benchmark allocations for Pacific ex. Japan, Canada, the U.K., and Japan. The U.S. allocation rose to marketweight.