Strategas' Chris Verrone expects new market highs this summer

Chris Veron, Head of Technical and Macro Research at Strategus is back at post nine with where he sees the market going. I mean if gosh, it was what a few weeks ago we felt like, oh, we in the store for a 10% or more correction and here we are, are are, are we, should we be believers in this bounce back? Yeah, I think we should and really for a couple reasons. You know by third week of April you started to see the oversold conditions come together and you know the judge of any oversold is how the market responds from that. And I think it’s been very compelling since I mean number one, you have the VIX back to where it was pre correction. You have credit conditions which never deteriorated even as the market was coming in. So look at double B or even triple C spreads are on their lows and I think maybe most importantly of the lot financials are right back at the highs. I mean these banks have acted great through the correction and now coming out of it. And Scott, I think when you’re working through these corrective phases, you always want to be paying attention to what is the first groups making new highs coming out of this. And you know the banks are there a lot of global markets already back at the highs as well. So this still looks pretty good to us. All right. So now take, take all that. What’s it mean for friend, for how long? Yeah, how long is this sustainable? We have good seasonality basically from mid-May through about late July, the old sell in May and go away. I don’t know where that came from. It doesn’t work. When you look at the data historically that late May through about late July, he’s actually one of the sweet spots of the calendar. But what I think is more important here is how the leadership might be evolving. Look where the strength is coming from. Financials, materials, rest of world in the strength in China is under appreciated. The strength in Europe is under appreciated. UK Footsie just broke out of a massive rain. So maybe we’re changing what’s driving it, but I would expect new highs in the summer. You would, I guess we’ve seen this movie before with a more broad move higher. What does that mean for the tech trade where there were real questions about it, but then it kind of it came back and it came back strongly as a result of earnings. I don’t think it’s quite as monolithic as it has been the last six or seven months. You saw it with the MAG 7 earnings. There’s been some divergent even Microsoft which is not too far from the highs on a relevant basis that’s been a bit underwhelming. Where the strength has really come from Google. That chart continues to look fantastic. I think the rally in Apple we ought to be a little bit careful with. We’re back into to some resistance here. But the bigger story, as you just said, there’s a broadening re happening here. And I think the most important part of that is these global markets trade great. You know what’s interesting too is that the AI story we’ve been talking about it a lot on the network in the past few days at at minimum has made what may be considered traditionally defensive areas of the market not necessarily defensive. And and I’m zeroing in on utilities as I say that which are up 1 1/4%, you know this week because of all of the thought about, well, what’s going to power all these data centers and and all this production of these these AI chips. How are you thinking about that space and then other traditionally defensive area, It’s a great question. The first rule in our work is we know we don’t know, right. We’re trying to give our best guess and play probabilities. But I’m shocked how many times I’ve heard that line of reasoning over the last five or six weeks that this move in utilities is the next way to play. I play AI. I’d be careful with narrative creep. Whenever you start to see narrative creep, it does raise an antenna for us. Perhaps utilities are working simultaneously with Staples because there is a bit of a counter cyclical streak that’s running through markets here. So I would be careful about making the AI jump. If you want to play AI, buy AI stocks. I mean NVIDIA is closer to the highs than it was a few weeks ago crowded. I mean it’s not and and the valuations have gotten stretched right. I mean, if you’re looking for other ways to to play AI, I’m not saying like go out and buy every single utility name, but that that appears to be a legitimate angle and maybe the next angle to the AI story. Let me propose another hypothesis. Is it possible that utilities are turning here because bond yields don’t run away from us? Is it possible that utilities are suggestive that bond yields move lower? And that’s where I think is the more consequential piece of information choice C all the above perhaps don’t say I agree with you 100%. I think for macro investors the more important question is, is 6 months from now, is it 10 year yields at 5 and a quarter or is it 10 year yields at 4:00? And I think this turn in utilities to strengthen the banks, I argue more of a likelihood of four percent 10 year yields in five and a.