DC Lite #387

1. Economic data. "The economic data change index measures data relative to its one-year average, while the economic surprise index assesses whether those data are better or worse than economists expected. Both of these measures are deeply in negative territory. The economic data change index is at its lowest level in more than two years, while the economic surprise index is at its lowest level of 2025."

2. FOMC. Relative to its March projections, the Fed expects lower economic growth, higher unemployment, and higher inflation in 2025. The new dot plot still points to 2 rate cuts this year but signals a slightly higher path for monetary policy moving forward.

3. Retail imbalance. Retail investors "have been very active and skewed much better to buy."

4. Large vs. small. "25 years in the making…The IWB/IWM ratio is back to dot-com highs. Breakout = Mega-caps rule. Rejection = Small-caps rotate in. This is a leadership decision point."

5. P/E drift. "After trending in the same range from 1870 to 1990, the average US PE multiple (red line) has drifted 40% higher since 1990 from 14 to 19.5. That means the current PE of 23.5 is only 16.7 (23.5/1.4) if adjusted for PE drift since 1990. Reasonable."

ICYMI