Are You a Bull or a Bear?

With Spot VIX* below pre-COVID levels, there are many ways to view the US market at this moment.

Key Points - Bulls think:

•    Recent technology stock gains have been driven by the potential for AI, and how transformative this development may be for society.  NVIDIA stock price has increased 166% since the start of year.

•    With the Fed having held rates at their last meeting following 10 consecutive increases, are we finally seeing a light at the end of the tunnel for interest rates increases?

•    The S&P500 is officially in a technical "bull" market from its October 2022 lows.

•    The Silicon Valley Bank "crisis" was not systemic and lingering US debt-ceiling issues have recently been resolved.

•    For Q2, the estimated earnings decline for the S&P500 is 6.4%. With expectations so low, it might not take much for the market to rally, with earnings growth expected to rebound in the second half of 2023.

Key Points - Bears believe:

·     The FED has signaled that it may continue to tighten next month, potentially slowing the economy and increasing unemployment, while increasing the cost of servicing debt.

·     The stock market appears over-valued (the PE ratio of Nvidia is currently hovering around 200).

·     The Russia v Ukraine war can escalate at any moment, which can impact commodity markets and drive further inflation.

·     With exports from China shrinking 7.5% (YOY) to a three-month low of USD 283.5 billion in May 2023, there appears to a lack of growth driving demand out of China.