Mike O’Rourke (who a long time ago used to write Bedtime with BTIG, but who now writes The Closing Print for Jones Trading) expresses a view in his latest note that’s certainly felt by many, which is that the equity market is all about the Fed, and completely divorced from economic reality.
He uses yesterday’s rally as an example. Stocks re-hit their all-time highs, as the same time as we got a horrendous Dallas Fed manufacturing report.
The US equity market has given up even the appearance of caring about economic data. Throughout Q1, as the S&P 500 garnered an impressive 10% return, high hopes were pinned on a 3.5% GDP print, then expectations retrenched to 3% before the actual print of 2.5% emerged. The chart below illustrates that the economy continues to trudge along at a 2% year over year GDP growth rate.
Not to say that a single data point like the Dallas Fed Manufacturing index merits a market move, but it is surprising when the 3rd worst print since the recession is met by another push higher in Equities. Few would describe earnings season as anything but a disappointment. Obviously, the Central Bank Benevolence trade continues to dominate the tape.
As we noted last night, this has certainly been an impressive move this last week and a half.
Two weeks ago, the word “deflation” was on everyone’s lips. Now that’s forgotten.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.