It has now been one year since The S&P 500 reached record highs - proclaimed by all as proof that the recovery was real and that 2008 was dim and dismal thing of the past that could never happen again...
Small Caps (-11.65%) and Trannies (-10.25%) are the worst performers since the S&P peaked on May 21st 2015 closing at an all-time high of 2130.82
Energy stocks are the biggest laggard while utilities lead over the past year...
This is the longest period without a new high being reached since the crisis trough, as The Fed balance sheet has stagnated...
Leaving the S&P 500 back at its "most expensive" to The Fed Balance Sheet since the end of QE3...
But what else has changed...
Bonds +5.3%, dollar barely changed, global stocks -8.2%, commodities -22.3%...
Despite massive QE programs both euro & yen up versus US dollar (astonishing)...
Despite Fed hike & low yields long-end in US, Japan, Germany has rallied 10%, 18% & 9% respectively...
In The US, only the 2Y rate is hgher since the peak in the US equity market...With rates plunging policy-error-like since The Fed hiked rates...
Eurozone bank stocks back to ‘08 (Lehman bankruptcy) & 2012 (Greek default) lows, Japanese banks are down 30%, Chinese banks down 40%...
McDonald’s has been the best performing stock in the Dow Jones, Apple the worst...
But what about the fundamentals...
In the year since the peak in stocks, 2016 GDP growth expectations have collapsed... and along with them the yield curve, but stocks remain undeterred...
Earnings are ugly and Industrial Production plunging....
And inventories are soaring as the deflationary impulse of easy-money-enabled zombie production gluts a world with overcapacity when sales are lagging...
As BofAML concludes, we remain convinced "Twilight Zone" asset market performance is driven by end of QE3 & fears that an overvalued Wall St & deflationary Main St simply cannot handle higher rates.