Mixed (Market) Signals: 8 Chart to Leave You Confused

Bull and Bear cases both compelling

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Investing is hard.

Anyone who tells you they know what’s going on is either delusional or lying. Conviction in one’s beliefs is one thing, but only the naïve dismiss opposing views. In fact, many seek views that confirm their beliefs (confirmation bias). Why? Because it feels good to be “right”.

Those observing from the sidelines are left dazed and confused. The experts on all sides are convincing, dazzling audiences with reams of information and beautiful charts.

For me, this is what makes investing interesting. It’s a constant struggle to figure out what’s going on. For the best investors, experience compounds as they learn from their mistakes.

Those who wish to opt out are best suited for a well-diversified portfolio of cheap index funds. s

Below, I’ve sampled 8 charts that make compelling yet contradictory arguments.

Bullish: US households went into the current malaise and cost of living crisis stronger than ever. They have the financial ammo to weather the storm.

Bullish: Earnings are a key driver for stock market returns, and analysts’ expectations are rising.

Bullish: Credit growth within China is supportive for global markets.

Bullish and Bearish: Are markets pricing in a recession? Depends on which market you look at. Also, are these markets correct or complacent? Mixed signals galore.

Bullish? Bearish? Confusing? High yield (HY) spreads typically widen as leading economic indicators (LEIs) deteriorate. This is because the premium demanded for taking on credit risk rises as economic conditions deteriorate. This time around, spreads are not following this historical relationship. So which is right? LEIs or HY spreads?

Tactically Bullish: This chart shows that markets remain oversold, based on historical range of deviations. I.e. they remain poised for a continued bounce.

Tactically Bearish: This chart shows investor sentiment is frothy and it is time to take some money off the table. Confused yet?

Bearish: BofAMerrill Lynch chart below shows that big tech valuations are back to elevated levels not seen since the early days of the 2022 bear market. Froth has returned.

Bullish: The same BofAMerrill Lynch report, however, argues that big tech is in a secular bull market and that investors should buy on near-term weakness.

There are always contradicting expert opinions creating confusion among investors. This is why most average folks understandably don’t pay attention.

Quick poll: are you bullish, bearish or simply confused?