The S&P500 Index ETF (SPY) closed up 0.79 percent today while the equal-weighted  S&P500 Index ETF (RSP) was down 0.53 percent.  Based on the closing prices of both ETFs from Yahoo Finance,  SPY is now up 1.80 percent year-to-date versus a -7.75 percent move lower for the RSP.  It’s all about the big caps.

At today’s close, our favorite valuation metric is at a record level of  165.63 percent of nominal GDP, and that assumes current GDP is in the process of posting a 26.7 percent print for Q3, after printing down 34.7 percent in Q2, which is the Atlanta Fed’s GDP now estimate.   The metric is now 4.64 percent above the last record posted on February 19th, and 15.89 percent above the high set during the dot.com bubble in Q1 2020.

We do not know where the market tops, nor does anyone else but keep this metric as your context, folks.

Sort of like a gas gauge, the tank is close to empty, running on fumes (or wampum), but you do not know the exact spot where the engine stops, but stop it will.  The stock market can’t outpace the economy, forever.

We sold at 3025 late last year, shorted and covered at 3125, and have done nothing, except add a gold position.   Our trading days are pretty much over and it really doesn’t bother us, as it used to, watching from the sidelines missing a 10 percent-plus move.

We are also happy for those who have timed this big move, and the for stock pickers, such our very own, Coach Carol, who have been in the right stocks and have absolutely killed it.

We are fortunate to have the liberty to couch surf until the stock market gets significantly cheaper, and we do mean significant.

Biden Tax Plan

We also wonder when Mr. Market begins to price in Joe Biden’s tax plan?

Our guess?  Sometime soon, and we expect there will be a deluge of tax selling in the next few months.  In a rational world, there should be.

In an efficient market, there should have been.

We suspect, however, the Fed. coupled with all the buybacks, the stock market has temporarily morphed into a commodity market, which trades almost completely on supply and demand technicals with almost zero inherent information about economic fundamentals (see our donut shop analogy in this post).

Until it doesn’t, as all of history tells us it will again someday.