US equities rose for a second consecutive session to new records Thursday, as the risk-on sentiment tied to the cancellation (or postponement) of World War III continued to reverberate across assets.
For now, it would appear that Donald Trump has escaped unscathed from another self-made crisis. The president’s erratic behavior has once again been rewarded (and thereby reinforced) by what he clearly believes is a stamp of approval from one of the only “people” he listens to: Brigadier General Dow Jones.
Tech once again led the way on Wall Street. Dollar-yen is now well through levels seen prior to Qassem Soleimani’s assassination.
If stocks manage to gain on Friday, the Nasdaq 100 could well end up logging its best week since late August, when markets were recovering from a recession scare catalyzed by trade worries. Big-cap tech is up more than 2% this week.
Meanwhile, if you’re looking for a risk appetite barometer, try yuan-yen. The offshore yuan is sitting at a 5-month high versus the Japanese safe haven, and looks like it may want to fill the gap from last May.
We took a brief visual tour through the global euphoria on Thursday morning, noting that equities across various EMs are pleased that an all-out, raging conflagration in the Mideast has been at least temporarily averted. In that context, it’s worth noting that the 14-week RSI for EM equities on the whole is now at the highest level since January of 2018, just prior to the VIX ETN blowup that triggered a correction.
And implied vol. on the ETF is back near the lowest levels in years.
Even Jeremy Siegel is concerned. “I’m just a little worried that this is becoming a momentum-driven market at this point”, he told CNBC on Thursday. “You don’t know how far it will go. Certainly no sign of a break right now, but I think we people jumping on the train here and are going to ride it on a narrow path until they feel they’ve got some good gains”.
Spoiler alert: It’s been a “momentum-driven market” for a long, long time, Jeremy.
Finally, when you think about the Nasdaq 100, do note that the forward P/E is now the highest since 2007.