Markets Have First Down Week in Four, Meme Stocks Make a Comeback
Key Takeaways
  • The S&P 500 closed at 4,228.48. Markets had a choppy week in a pretty narrow range and had a pullback Friday that put the index negative for the week. VIX is back above $20.
  • The market has retraced a lot of gains since the decline in 1H. Bearishness is still very high amongst institutional investors.
  • Retail sentiment has been high. There’s been record activity on Wall Street Bets.

Good Evening:

The market had its first down week after a strong rally. Macro concerns are high and there’s no shortage of bears on the street. At the same time, inflation rolling over has proven a strong catalyst. When inflation is high bonds and stocks are positively correlated, which gives institutions nowhere to run and nowhere to hide. When the environment is disinflationary or deflationary the correlation is generally negative. The negative correlation is one of the drivers of the oft cited 60/40 portfolio. And then remember also that there are almost no living portfolio managers that have been alive in an inflationary environment like we face today. Our Head of Research, Tom Lee, thinks that if inflation has peaked that this should set us up for a nice rally in the 2H where new all-time highs are possible. He will elaborate more below.

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