Interesting to see that S&P 500 has again rebounded by around 7 % during last week, like for the period 10 May-2 June.
So, there have been 2 major trends : - a clear rotation out of energy/materials into tech/consumer sectors, - a general rebound of the market.
The first trend seems to me more sustainable than the second one. As it is clearly supported by the correction of commodities prices, due to a higher probably of a recession. There is also probably opportunities now in tech/consumer sectors after their large correction, in particular due to the good visibility of earnings for certain tech (may be interesting in case of a recession).
I am not yet convinced that the US market has discounted all the risks of both lower PE/lower estimates, with a correction of only around 18 % YTD. To justify today's Shiller PE (adjusted for interest rates), the market needs to discount a 10 year treasury rate of around 1.9 % (vs 3.13 % now). This looks to me very premature given what we expect for inflation during the next 2 to 3 years.
