Bulls on Parade

DoubleLine’s Ken Shinoda opens his latest Channel 11 update declaring “bulls on parade” – and the data backs it up. Equity markets are ripping to new highs following a declared ceasefire in the Iran war, led by a near 20% gain in the Nasdaq Composite Index in April. The Mag Seven are back in front, first quarter earnings are tracking well above initial estimates at roughly 25%, and semiconductors are going parabolic on AI-driven capital expenditure. Both services and manufacturing PMIs are running comfortably above 50 (expansionary territory), nominal GDP expectations remain elevated, and commodities continue to break out. All this points to a resilient U.S. economy with no recession in sight. Europe is a clear laggard, hurt by energy dependence and rising back-end rates, while emerging markets and non-China Asia look more compelling for non-U.S. exposure. The macroeconomic concern is inflation. Rate cuts expected at the start of the year are fully priced out, with the market now assigning a real probability to a hike. Five-year inflation breakevens pushing toward 3% are “a little spooky,” and Mr. Shinoda is watching the 30-year U.S. Treasury closely: “I think if that 30-year breaks above 5, that could start putting pressure on risk markets, both equities and credit spreads.” In fixed income, shorter-duration and higher-quality credit has been the place to be, with high yield spreads rallying toward year-to-date tights. He closes with cautious optimism – portfolios are up, but with prices higher, the easy money has been made.