The U.S. stock market just put in its best week of 2023 as Treasury yields tumbled, stoking hopes for an early “Santa rally” to end the year. Scrooges say there’s still plenty that stands in the way.
Consumer credit is where bearish investors see trouble brewing. “Data suggests the consumer is tapped out in terms of credit,” Hsu said. The bulk of third-quarter earnings reporting season is now in the rearview mirror. Downbeat investors focused on weak guidance around the potential for a slower economy.
A hurting consumer likely means disappointment is in store on the earnings front in coming quarters, Hsu said, even as executives attempt to guide investors toward a “hard landing.” It was one positive catalyst after another for bond bulls this past week. The U.S. Treasury on Tuesday set plans for less debt issuance on the long end of the yield curve than anticipated and jobs data, particularly the Friday jobs report, showed some signs a robust jobs market may be showing some early signs of cooling.
Also, the market’s “relief rally” had “some notable echoes of the market bottom of a year ago, with extreme weakness in momentum and sentiment indicators,” Hackett wrote. “The resilient macro backdrop, strong seasonality, and improved valuations should provide tailwinds into year-end.”
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