3 Wall Street Giants Have Strong Bearish Arguments. They Aren’t Working — Yet.
Jamie Dimon, Paul Tudor Jones, and Steve Cohen all warn about the high risk of a recession. But does the data back up that view?
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The S&P 500 is working on its fifth straight day of gains on Friday as the indexes continue to trend higher following a dramatic cut in tariffs on China trade. The momentum has slowed the last couple of days, but there have been aggressive dip buyers and some favorable economic news to keep market players invested.
Meanwhile, the bears have been insistent that it is too late to avoid the fallout of President Trump’s tariff policies and that the danger of stagflation is extremely high. The PPI report on Thursday showed no signs of inflation, and that helped to boost the likelihood of Fed rate cuts later this year.
Several well-known Wall Street titans, such as JPMorgan Chase JPM CEO Jamie Dimon, and billionaire hedge fund investors Steve Cohen and Paul Tudor Jones, believe that the risk of a recession is still very high despite positive progress on trade and tariffs. However, there has not yet been any data to back up that view. The consensus view on Wall Street is that a slowdown is coming, but if inflation doesn’t run too hot, that will likely give the Fed cover to cut rates to boost economic growth.
The other issue that the bears are focused on is a rotation out of U.S. assets in general. The dollar has slipped the last few days, and bonds TLT have been under pressure for weeks. Trade and tariff deals are not likely to stop this from happening.
Housing starts data are due at 8.30 a.m. ET Friday, and consumer sentiment for May at 10 a.m. ET. Last month, the market was spooked by a very poor sentiment reading, and since this data are prior to any of the recent trade deals, there is a good likelihood that they will lag as well.
Technically, the market action continues to be very positive and staying sticky to the upside. There have been a few flourishes of profit-taking, but renewed interest in the Magnificent Seven is doing much of the heavy lifting now and offsetting some slippage in breadth.
As I noted on Thursday, I cut some deadwood and raised my cash levels, not because I’m bearish, but to increase my flexibility as volatility increases. I want to keep accounts close to highs and expect at least a little profit-taking to occur soon.
We have a positive opening on the way.
At the time of publication, Rev Shark had no positions in any securities mentioned.
