After rounding up the usual suspects and asking them to comment, off the record, on what they are seeing on their trading desks, here’s what I’ve found.
- The consensus of Wall Street traders is that this rally is just a dead-cat bounce.
- They expect the S&P 500 to run for a couple more days and then start to sputter and cough.
- There will be a test of the recent lows, and the big number is 2,581. If that goes, look outs below.
- They don’t care about Trump, Mueller, Russia, or China. They only care about what Fed Chair Powell will do next.
- The big headwinds for the equity market are rich valuations, drying liquidity, rising rates, softening of earnings estimates, and ballooning deficits in the U.S.
- These headwinds will not go away just because Trump and Xi have agreed to take a time out in their trade war rhetoric.