It’s starting to become more than a murmur in the markets. Several vets in the marketer looking for what they say are a “long overdue” meltup. Now, don’t be nervous if you don’t know what a market meltup is. We’re sure you’ve heard of the term melt down before.
Well, according to the text book definition, a meltup is the opposite of a meltdown, which is a “dramatic and unexpected rise in the performance of an asset class driven in part by the stampeded of investors who don’t want to miss out on the rise versus fundamental improvements in corporate structure. Simply put, the fear of missing out of “FOMO” could be the next driver to the market instead of actual company fundamentals.
“We make the case that despite the Fed’s intent, we’re on the verge of being in a melt-up stage, fueled by excessive credit and a timid Fed,” wrote technical analyst Jeff deGraaf, chairman of Renaissance Macro Research,
It is not a straight and clear path, however. Whether the breakout falls short of the improved fundamentals or if economic data begin to push excitement, or if upgraded gross domestic product comes into light, investors will still need to be aware of the melt up scenario.
Some other conditions like favorable credit information could also begin to push inflation of assets. The gap between the yield of two year T notes (nearing 10-year highs) and the fed funds rate could be a talking point in the meltup conversation.
Data from employment information and levels of purchasing from managers are both showing that the market is going from simmer to boil. It also triggers the topic of the fed taking up the rest of the conversations with regard to whether or not rates will be hiked this year.
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