Welcome to March Madness

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, March 1. Welcome to March. The Bottom Line segment of today’s podcast starts at (3:45) for listeners who want to skip ahead.

State of Play

Stocks advanced yesterday after the PCE Deflator came in exactly as forecast. The S&P 500 (SPY 0.00%↑) and Nasdaq closed at record highs — first time since late 2021 that we’ve seen a fresh record high for the latter. As we look at our board of indicators at 0645, there are no clear signs of direction on what should be a quiet Friday:

• Stock index futures aren’t doing anything. Only the Russell 2000 which tracks small caps is moving at all from the break-even point, down 0.2%;

• Commodities are mixed. WTI crude oil is up 1.5% to trade around $79.50/barrel, which is the highest it’s been in a couple of months. Copper is down 0.3%;

• Bonds are seeing some bids, with the 2-year yield down 6 basis points to 4.59% whilst the 10-year is down 3bps to 4.22% (yields move inversely to prices);

• Cryptos are taking a bit of a breather, with Bitcoin down 1% to trade just south of $62,000.

Today’s Known Events

It’s a slow day. There’s no economic data releases worth mentioning. We get another reading of Manufacturing PMIs and Michigan Consumer Sentiment, but both of these will likely just repeat what was in the first iterations. As such, they can be safely ignored.

There are a few earnings. Daimler Truck Holdings AG spiked 14% after reporting overnight. Otherwise the pickings are slim. Plug Power (PLUG 0.00%↑) and FuboTV (FUBO 0.00%↑) are really the only two worth mentioning here.

The Bottom Line©️

March Madness may be upon us. Not the basketball tournament, though that too, but signs of bubblicious insanity in financial markets. Look no further than cryptos’ surge. Another sign of a bull market comes from the IPO market where activity is picking up. Yesterday online brokerage Webull said it will go public through a SPAC deal. Just what the world needs, more SPACs and more online brokers.

And yet, it doesn’t feel like a true mania. We last experienced that in 2020 and 2021 and even that wasn’t as insane as the late 90s bull market (for those of us old enough to remember).

The parabolic move in cryptos and in everything AI tells us there should be another leg to the bull market. But just as easily, the whole thing could fall apart with little to no notice. What was the catalyst that pricked the dot-com bubble? Was there even one? The only thing one can really point to is news of a recession in Japan, which initially caused investors to dump tech stocks. Probably investors had been looking to dump those shares for some time. For all intents and purposes, that ended the party. There were a few dead cat bounces after that, but that was it. The intermittent peak for the Nasdaq was March 10, 2000. It took 15 years for the Nasdaq to recover those losses.

Not saying March 2024 is going to be a repeat of March 2000. Nobody knows what’s going to happen, much less when. Just something to keep an eye on.

Portfolio Update