Gavekal: Do Bubbles Predict Or Project?
With the second quarter data season now in full swing, the rebound in equity prices that followed the Covid-19 panic seems to have stalled. This was always to be expected (see Time To Run With The Herd?). Predictably pessimistic corporate guidance and dire economic data are forcing investors to reassess hopes of a V-shaped recovery based on projecting into the future the rebound in high frequency indicators that was inevitable after the lifting of Covid lockdowns.
So, what happens now? Will markets balk at the hurdle of terrible earnings and grim data? Or will bulls charge through these obstacles, pushing momentum-driven equities to ever more vertiginous highs?