Broker Check

Markets again totally ignored the negative data from last week (and there was plenty)

March 05, 2024

Notably, markets again totally ignored the negative data from last week (and there was plenty) including hot services inflation in the Core PCE Price Index, underwhelming durable goods, pop in jobless claims and mixed earnings results. The market’s relentless rally, in which it embraces even the mostly slightly bullish news and ignores any bad news (known on the Street as a “Teflon” market because nothing sticks), is raising this question: Can anything make the stock market decline?

The answer, of course, is “yes,” and we’ve detailed those factors (slowing growth, reduced rate cut expectations, falling earnings expectations among others). But for now, the bullish mantra of “Stable growth, falling inflation, impending rate cuts and AI promise” remains intact and until investors are hit with a proverbial “board to the face” of negative data, bad earnings, AI exhaustion or the Fed saying rate cuts aren’t coming, the default direction of stocks will be higher despite 1) Very stretched valuations and 2) Legitimate signs that the macro and microeconomic outlooks could be dimming at the market over the coming months.

Put in plain English, in order for this market to decline, something blatantly bad has to happen. Negative nuance (like we got last week) won’t be enough as bullish investors are in a trance-like state repeating that bullish mantra (stable growth, falling inflation, impending rate cuts, AI promise).


While that bullish trance keeps the path of least resistance higher for stocks, it doesn’t negate the fact that

1) Valuations have reached unsustainable levels with the S&P 500 moving towards 22X next year’s earnings,

2) Sentiment and bullish optimism is rampant and at levels that usually foreshadow a pullback or correction and

3) AI optimism remains a powerful but ultimately unproven bullish factor in this market and it’s very important for everyone to keep in mind that if AI doesn’t turn out to be a seminal change in business productivity or profitability, then much of the October-December rally will be in jeopardy.


Until something blatantly “bad” happens on growth, inflation, rate cut expectations or AI enthusiasm, it’s tough to actively reduce exposure. The logic remains consistent. If the rally continues, it’ll likely also continue to broaden and benefit not just tech sectors. However, if something legitimately “bad” does happen, these tactical strategies should relatively outperform the S&P 500 and be able to help investors keep more of these substantial gains. Again that is why we remain exposed to dividend stocks/value stocks. 

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