Good morning,
A lot has happened in the two weeks since our last report.
First, the S&P 500 tied its all-time negative breadth streak at 14. Luckily, that came to an end on December 20 with an 8:1 up day, followed by better than 10:1 advancers vs. decliners on Christmas Eve.
While stocks may have temporarily stabilized from deeply oversold conditions, bonds are a different story.
The 10-year Treasury yield ended last week at its highest closing level since May, and as our fixed income section will show, has changed its trend on every time horizon.
Perhaps equally important is the short-end, which has continued to rise and now met the effective Fed funds rate following the most recent cut from Powell & Company.
The fact that the 2-year yield is no longer expecting cuts is an important macro story investors need to be aware of.
But, when it comes to portfolio positioning, investors would be wise to leave the macro story at the door and focus on current trends.
It’s easy to weave a bearish narrative for 2025, and we did just that a few weeks ago in Overtime. But while the recent pullback may not be fully played out, stocks are still in a firm uptrend, even the lagging ones like small-caps.
But bonds? They’re a disaster.
And the idea of trading stocks for bonds? Forget about it.
The bond market has changed its mind and we can’t dismiss the risk of a continue rise in yields.
Today’s report will highlight 3 ways to get portfolios more defensive without selling stocks and without making the mistake of thinking we’re in the prior 4 decades’ interest rate regime.
This week’s report will review:
Negative breadth extremes and current SPX technicals
What has (and hasn’t changed) with the bond market
Key support levels on major ETFs
Risk ratios
Weak bounces
and more!
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