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“Live life expecting the worst, hoping for the best, and living for the future” – Jerry Garcia

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As if on cue, the calendar flipped to August and futures are pointing to a lower open this morning.  Things started off well enough overnight in Asia where Japan, South Korea, and Australia all traded higher, but Europe picked up the baton and has headed south since the open. The catalyst for weakness there has been some lackluster manufacturing PMI data, but at this point the declines are relatively modest. While the headline PMI reading for the Eurozone was right in line with expectations, it remained deep in contractionary territory at 42.7.

In the US today, the focus remains on earnings, but fifteen minutes after the opening bell, we’ll get the S&P US Manufacturing PMI followed by Construction Spending, ISM Manufacturing, and JOLTS at 10 AM.

With a rally of over 28% from its bear market lows in late 2022, equities have really come a long way in a short period of time, but if you widen out your view from the extreme lows of last year and look on a calendar basis, the gains don’t look quite as impressive.  In the case of the S&P 500, over the last 12 months, it’s still up over 11%, but on a two-year basis, performance looks much less attractive at just 4.4%.  That hardly looks like a market that has become unanchored from reality.

The Nasdaq is a similar picture. It has rallied more than 40% from its bear market lows and is up nearly 16% over the last year.  Over the last two years, though?  Down 2.2%.

Lastly, the Russell 2000.  It’s been a laggard off the lows and over the last year as well with gains of 21.4% and 6.3%, respectively.  The two-year performance looks downright depressing with a decline of 10%.  When you have big gains in a short period of time, yet longer-term returns are still flat to down, all you can say is “What a long strange trip it’s been.”

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