Euphoria with Questions

The divergence between rallying DOW and falling NASDAQ returned on Friday amid a new surge in bond yields, now posting their 6th weekly gain. The upcoming months are likely to offer the greatest convergence in positive real-life sentiment and market sentiment in generations. Economies are reopening, vaccines are rolling out and pent-up demand is insane. It's a perfect storm ... right? Ashraf sent out yesterday the Premium video (below), stating NASDAQ would dissipate at 13110/20. Indeed, the index topped at 131120 overnight  before tumbling 300 pts. 

We called this piece Euphoria with questions, because of the point tweeted below, which has been highlighed in detail in the above video. 

Normally, it's the job of central bankers to end this kind of party by taking away the punch bowl, but they're drunk on the idea of forward guidance and overshooting on inflation.

So we're about to have a great moment in the economy at the same time as money is cheaper than ever. It's no wonder US stocks closed at record highs on Thursday and quickly snapped back from the bond-driven jitters.

Last week, Ashraf gave a list of his favourite 15 stocks to members of the WhatsApp Broadcast Group, which he deemed are best to benefit from the stimulus, infrastructure, clean energy and other technnological niches.  

On the fixed income front, a 30-year sale went off without a problem Thursday. The ECB's bond buys will also help to keep global rates depressed for the next three months. Europe is behind in the vaccine race but they will catch up.

In the bigger picture, euphoria will continue to build until fiscal or monetary tightening puts an end to it. The further it goes, the less it will take to deflate the bubble.