Stocks Only Care About One Thing Right Now

The market continues to climb a wall of worry.

Stocks rose again yesterday despite widespread riots and violence in the US. I think this is ridiculous, but as I keep telling my clients, “It’s not what we think, but what the market thinks that matters.”

And the markets think stocks are going HIGHER. Indeed, the internals are VERY strong despite all of the negative headlines.

Breadth typically leads stocks. And right now, it’s leading them higher.

The chart below proves this. Breadth (dark blue line) suggests the next leg up is here now. By the look of things, stocks could hit 3,100 on the S&P 500 this week. 

Chart: Breadth: Stocks Are Moving Higher 

The same is true for high yield credit. Here again, we see a market leader telling us that stocks should move higher shortly.

Chart: Credit: Stocks Are Moving Higher

In simple terms, the market is telling us that it doesn’t care about riots, unemployment, or any of the other horrific headlines today. 

So what does it care about?

Fed liquidity.

Stocks are Rising on Major Money Printing

With that in mind, the Fed balance sheet has broken above $7 trillion. 

It was at $4.1 trillion in late February 2020. So we are talking about roughly $1 trillion in liquidity hitting the financial system every single month.

Chart: $7 Trillion and Climbing

If I’ve learned anything from the markets over the last 12 years, it’s that stocks LOVE Fed money printing. Small wonder then that stocks are overcoming an economic depression, political turmoil, and more. 

Put simply, there is no reason to overthink this. The trend remains up for now. 

The key is to keep one eye on the exits for when stocks begin to care about something other than Fed liquidity.

Best Regards,

Graham Summers
Editor, Money & Crisis

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Graham Summers

Editor Graham Summers has spent the last 15 years building a reputation as one of the most sought after and highly respected investment strategists on the planet. His work has been read and quoted by former Presidential advisors, award-winning institutional analysts, U.S. Senators, and more. He’s one of the few analysts on the planet to...

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