09May9:50 amEST

Back in the Saddle

Seeing as the S&P 500 is trading pretty much exactly where it was one year ago at this time, it occurred to me that this period may very well be referred to as, "The Great Drain."

So what is being drained?

Brokerage accounts? Mental and emotional capital? Careers? Precious time on Earth?

Perhaps all of those.

However, I am specifically referring to all of the excess liquidity from the pandemic (and, if you want to get cute, even dating back to 2008/2009 with Bernanke's QE and ZIRP to counter the Great Recession). 

Even though the current market is facing headwinds galore, is expensive on many fronts, has been essentially "fighting The Fed" since last October, and at times is laughably complacent, perhaps all of the excess liquidity from the pandemic still needs to be drained out before we see a fresh bear market leg down. 

Bulls have been countering that we are already in a new bull run which began last October at the lows. But breadth is inconsistent with that view, as is the general lack of broad leadership. Further, the top performers this year mostly are the leaders from the last bull market, which history says does not happen--We almost always get a fresh batch of new leaders. 

With the CPI tomorrow morning and a looming debt ceiling showdown which could be the nastiest we have seen since 2011, the fact that the VIX is in the teens here tells me most of what I need to know about how little respect for coming risks there is, on top of bearish seasonality into late-spring. 

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