??? Market Bulls have No Fear ?? Also: EUROcession; GM and TSLA Superchargers ??? VIX and a Fearful Wall Street

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• US large-cap S&P 500 closed 0.62% UP ▲
• Tech-heavy Nasdaq Composite closed 1.02% UP ▲
• Pan European STOXX Europe 600 closed 0.02% UP ▲
• HK/China's Hang Seng Index closed 0.25% UP ▲
• Japan's broad TOPIX closed 0.67% DOWN ??

?? Focus

• Market Bulls Have No Fear

?? In the Markets

• EUROcession
• GM and TSLA Superchargers

?? MoneyFitt EXPLAINS

• ?? VIX and a Fearful Wall Street

?? Focus

Market Bulls Have No Fear

Wall Street's favourite "Fear Index" The CBOE Volatility Index, or VIX??, fell to 13.55 Thursday, the lowest it's been since Valentine's Day, 2020, showing that pandemic-related volatility in financial markets is over. The VIX is widely used as a measure of investor uncertainty, and even though it is really generated from how much the S&P 500 Index moves in EITHER direction (the range of movement, but calculated using the "implied volatility" in index options prices), a low reading is typically associated with a strong stock market and "risk-on" investor sentiment, and vice versa.?

No fear

- Image credit: TradingView

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..... ? And sure enough, Thursday's low VIX came along with the S&P 500 rallying to end the day "in a bull market" (see below), which is defined as a 20% surge since its most recent low, which was on October 12, 2022. And, with that, the bear market that began in January 2022 is officially over.

..... ? Because the S&P 500 index is market capitalisation (share price X number of shares) weighted, meaning that the biggest companies are the biggest components of the index, the moves of the biggest companies will have an outsize impact on the moves of the index as a whole. And that's exactly what has been happening through the whole bull run since October, with mega-caps like Nvidia, Meta, and Amazon driving the market and leaving smaller stocks in the dust. So it's been a bull market in mega-cap tech stocks, but not really for the many other companies that make up the market. Bloomberg data show that more stocks in the S&P 500 made new 52-week lows than 52-week highs in May, whereas in more sustainable, long-lasting bull markets, you would usually get broader participation across sectors and company sizes, which hasn't happened (so far).

..... ? It's also worth noting that this technical measure of a bull market as rallying 20% from a recent bottom is rather arbitrary and only became common from the 1990s (perhaps from technical trading chartists Ned Davis Research.) More importantly, saying "we're IN a bull market" implies that the bull market is going to keep going and going --as actual bulls do-- but really it just says that the markets HAVE already gone up. That's all it means. (Though to be fair, if markets do continue on to a 30%, 40% or 100% rally, you will first have to cross the 20% mark.) Some others define a bull market as starting only when the index clears its prior high, which is an even worse definition.

Not scary at the bottom

- Image credit: Tenor

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?? In the Markets

Stocks climbed Thursday with yesterday's profit-taking in large-cap tech names evaporating as traders looked ahead to key inflation data and the Federal Reserve’s latest policy announcement next week. The Eurozone entered a mild technical recession (see below), and Chinese banks started to cut deposit interest rates (a little) under instructions from Beijing to stimulate the economy.

..... ? Bad news is Good News again? New data showed initial jobless claims (the number of people losing their jobs and livelihoods last week) reaching their highest levels since October 2021. These job losses seemed to make stock market traders very happy, as it suggests that the red-hot US labour market might potentially be cooling --finally-- after 15 months of interest rate hikes, and adding to expectations from highly-paid market experts that the Fed would finally pause its rate-hiking campaign after its upcoming meeting. But would it be a hawkish pause (like Canada's back in January) or a doveish one?

EUROcession: The 20 countries that use the euro fell into a mild technical recession in the first quarter, as inflation dampened consumer spending amid slashed government spending. A recession is defined as two consecutive quarters of economic contraction, and recent data show the economy shrank 0.1% in the first quarter of this year compared to the fourth quarter after the fourth quarter shrank by 0.1% from the third. Both numbers had been revised down a little from before, but either way, the Eurozone economies have been pretty stagnant relative to much greater strength across the pond, with the US growing by 0.3% and 0.6% in those same periods.

..... ? Such a sluggish region, especially with Germany, the biggest and strongest economy, leading the revisions down, makes the European Central Bank's decision on interest rates next week even more tricky. May inflation at 6.1% is still miles above the 2% target rate, but ever-higher rates would further squash economic activity.

GM and TSLA Superchargers: Two weeks after a similar deal with Ford, Tesla announced in another big win that General Motors' electric vehicles will be able to use Tesla's Supercharger network with an adapter from 2024, with a full switch to Tesla's connector design from 2025 (NACS, or the North American Charging Standard.)?

..... ? With two of the largest traditional automakers adopting Tesla technology, and doubling access to fast chargers for their customers, others may follow suit and turn the Supercharger into the industry standard for years to come, at least in North America (reversing what had been agreed by everyone other than Elon Musk back in 2012.)

And in a win for Tesla CEO Elon Musk's Twitter, the deal was announced by GM CEO Mary Barra and Musk on live audio via Twitter Spaces... in the first thing Barra and GM have done on Twitter since suspending ads when Musk took over the platform.

MoneyFitt EXPLAINS?

?? VIX, the volatility index (the Fear Index)?

Wall Street's favourite measure of investor nervousness is the VIX, its "Fear Index".

VIX is both the ticker symbol as well as the popular name for the CBOE Volatility Index, which uses the prices of S&P 500 index options to show the stock market's expectation of volatility. (Volatility is one of the calculations that go into options prices, so once you know the options price and the other factors, you can figure out the implied volatility from there.)?

When the VIX is high, price movements, either way, are expected to be high. A high VIX means high levels of fear in the market. Obviously, nobody minds volatility if it means big price movements upwards only, but that's how the maths works!?

As a rule of thumb, readings above 30 tend to appear when markets are feeling fear, uncertainty and doubt (FUD.) Some people use it as a contrary indicator, meaning that when it is very high, everyone is afraid, and anyone who wants to sell will probably already have sold, with all bad news "priced in."?

The all-time high was about 80 in 2008 with the all-time low of 11 in 2017.?