We can see below that safe haven assets have been bought yesterday due to the current political stalemate.
However, we can see below that the 10Y rate is slowly moving higher, which is the reason for equities valuation to have increased compared to other assets.
The equities equilibrium price at current 10Y rates is around $4000.
We can see below that the largest caps attracted the most money at the end of last week when a political agreement on the debt ceiling was in sight.
The small caps however continue to be under pressure due to higher rates.
Also note below that the Mcclellan indicator continues to point down.
On a macroeconomic level, here is an interesting comment on inflation reversing down.
http://scottgrannis.blogspot.com/
Conclusions:
Equities markets are too expensive for now. The best is to wait for the debt ceiling issues to be resolved and then see what the 10Y rates will be doing.
Usually, the Fed lowers rates after a credit or an economic event that already pushed equities down. And once equities start moving down, the move can last weeks/months before reverting higher, with the Fed cutting all the way to the bottom.
I believe that cheaper equities prices will show themselves during the next three months.
Below are the trade ideas for the coming days.
