Market Characterization: Chief Investment Officer Dave Burroughs frames the current environment as a highly bifurcated "market of halves and have-nots" [00:00:21]. Headline index values hover near record peaks, but internal market leadership is narrowing drastically.
Seasonality Factors: Tactical caution is elevated heading into late May. Historical data reveals that US midterm election years frequently introduce significant performance volatility and seasonal "bumps" across equity markets during the summer months [].
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Catalysts on Watch: Institutional focus is fixed on Nvidia's impending quarterly earnings release to gauge whether fundamental growth can match aggressive forward pricing models [00:01:07].
Macro Index Trajectories & Historical Analogues
Secular Backdrop: The secular bull market regime that originated in 2013 remains fully structurally intact [00:01:27].
S&P 500 Tracking: Following a primary spring correction of approximately 21% and a secondary 10% retracement spanning February to April, the index successfully cleared its previous early-year highs [00:01:34].
NASDAQ Performance: The NASDAQ consolidated between November and April, experiencing a 14% peak-to-trough drawdown that temporarily breached its 200-day moving average [00:02:00]. The subsequent recovery since early April represents one of the most powerful, vertical tech rallies witnessed since the late 1990s [00:02:08].
Mean Reversion Risk: Current charts show extreme upward extensions from the historical mean. Burroughs identifies past structural market analogues of similar magnitude occurring in March 2000, late 2008, and February 2021 [00:02:58].
The AI Premium: While artificial intelligence represents a generational technology paradigm shift, historical cycles indicate that markets routinely discount and pay for structural operational shifts years before actual corporate earnings fully materialize [00:03:19].
Internal Market Breadth & Concentration Rot
Equal-Weight Stagnation: The equal-weight S&P 500 index has completely failed to secure a new absolute high since its peak in February, rejecting key overhead resistance levels during breakout attempts in mid-April and mid-May [00:03:47]. The equal-weight NASDAQ 100 exhibits identical structural divergence [00:04:16].
Internal Distribution Breakdown: Major indices are achieving marginal new highs even as an expanding list of individual underlying constituents drop to fresh absolute 52-week lows [00:04:30]. Capital returns are concentrated in an unsustainably small cohort of mega-cap stocks while broader market participation narrows [00:04:43].
The "Thick Ice" Analogy: Burroughs compares tracking market breadth to measuring the physical thickness of ice under foot [00:11:42]. Systemic market liquidations routinely manifest first within weak peripheral equities without impacting the headline index, gradually eating away at underlying support until the correction finally reaches the ultimate mega-cap market leaders [00:11:30].
The 300-Year Rule: Historical analysis of 300 years of market cycles indicates that durable bull markets require expanding internal participation; no major systemic bear market has ever commenced while general market breadth was actively expanding [00:10:45]. A visible contraction in breadth dictates a prompt reduction in risk tolerance, stricter enforcement of stop losses, and elevated cash levels [00:11:06].
Tactical Breadth Indicators: A 4-Week Reality Check
A direct internal audit of Barometer's proprietary market breadth indicators reveals rapid, uniform deterioration over the trailing 4-week window [00:12:30]:
Long-Term Uptrends: Four weeks ago, the percentage of individual equities maintaining long-term structural uptrends across Canada, the US, and international markets was expanding [00:12:30]. Today, the total number of global stocks preserving positive long-term trends has significantly contracted [00:13:13].
50-Day Moving Average Tally: The count of individual equities maintaining price support above their intermediate-term 50-day moving average was highly positive a month ago [00:12:38] but has since broken down cleanly [00:13:23].
Weekly Momentum Trajectory: Shorter-term positive price momentum was expanding uniformly [00:12:45]. This metric served as the leading indicator of deterioration, flattening out before completely rolling over across key sectors [00:13:29].
New Highs vs. New Lows Ratio: This relationship has structurally narrowed, confirming that underlying corporate equity expansion has stalled [00:13:39].
Sector Breadth Aggregates: The percentage of healthy, positively performing stocks within the average market sector has fallen sharply to 40% today, down from 46% just one week prior [00:28:44].
Macro Environment: The Second Wave of Inflation & Yield Breakouts
Secular Interest Rate Regime Shift: Long-term macro interest rates continue a major structural rising trend that bottomed out at a generational low in 2020, terminating a 40-year historical regime of secularly falling rates [00:14:23].
Yield Breakouts: The 30-year US Treasury yield has broken out to the upside from its multi-month horizontal consolidation range [00:15:06]. This movement signals the structural initialization of a "second wave" of inflation, heavily driven by rising fuel inputs and escalating costs of physical finished goods [00:15:36].
Hot Fundamental Inflation Data: Global PMI prices indicators are accelerating globally [00:16:10]. This macro trend was confirmed by recent US Producer Price Index (PPI) data, which exceeded consensus expectations across every single component measure, forcing long-term yields higher [00:16:17].
Sovereign Bond Value Erosion: Fixed-income capital destruction remains acute. The long-term US Treasury ETF (TLT) has entered its sixth consecutive year of strict price declines, hitting fresh absolute cycle lows [00:16:41]. This systemic fixed-income selloff is synchronized globally with clear breakdowns in Euro Bund futures and UK markets [00:16:56].
Growth Equity Headwinds: Higher baseline discount rates compress the mathematical present value of long-duration growth stocks trading at rich multiples of 30x to 35x forward earnings, as future cash flows are worth structurally less today [00:17:25].
Fixed Income Avoidance Mandate: Barometer is actively avoiding sovereign fixed income due to extensive, unchecked government fiscal deficit spending and expanding debt burdens [00:34:36]. Portfolio safety dictates holding only companies with pristine balance sheets and zero near-term debt-maturing rollover vulnerabilities [00:35:18].
Commodity Cycles, Energy Deficits, & Precious Metals
Macro Asset Hierarchy: Top-down asset class relative strength clearly prioritizes: 1) Commodities, 2) International Equities, and 3) Domestic US Equities [00:20:30]. Despite this, private client portfolio allocations to physical commodities sit near 0% globally, indicating an incredibly early stage of a secular hard-asset cycle [00:20:22].
Crude Oil Supply Deficits: Physical oil prices remain structurally firm due to declining commercial inventories and persistent systemic drawdowns of national Strategic Petroleum Reserves (SPR) [00:17:54]. Aggregate global stockpiles are down approximately 1 billion barrels over the trailing 5 to 6 years due to capital underinvestment [00:24:24].
Industrial and Agricultural Commodities: Grains, soft commodities like cotton, and industrial base metals like aluminum continue to march steadily higher [00:17:35 - 00:18:41]. Copper relative strength versus the S&P 500 displays a highly constructive long-term breakout and technical retest sequence [00:25:00].
Gold Corrective Mechanics: Gold remains locked in a intermediate-term tactical correction since January, generating lower highs and lower lows over a 140-day span [00:19:04]. Burroughs notes that early summer is a seasonally difficult period for precious metals; the current correction could likely extend for another 30 to 40 days, possibly including a sharp undercut of recent intermediate lows to flush out weak hands before forming a cyclical bottom [00:19:29]. Structurally, gold is early in its long-term cycle, residing in leg 1 of an anticipated 3-legged secular bull market [00:19:42].
Global Equity Geographies & Valuation Arbitrage
Canada (TSX): Positioned as a premier global equity outperformer. The TSX trades virtually at absolute multi-year highs and has demonstrated superior relative performance against the equal-weight S&P 500 on a rolling month-to-month basis for the last two years [00:05:18 - 00:05:32].
Developed Markets ex-US: Reached a fresh all-time nominal high this month [00:05:47]. The absolute valuation multiple gap between overconcentrated US hyper-caps and international developed markets remains at a historical extreme [00:06:14].
Japan: The Japanese stock market hit fresh all-time highs this month, climbing a massive 62% over the trailing 12 months [00:06:30 - 00:06:38]. Burroughs models this as the initial stage of a structural secular bull market poised to endure for 10 to 15 years [00:06:57].
Taiwan & South Korea: Both nations logged new all-time highs this month before undergoing mild technical consolidations; both function as primary regional proxies for global semiconductor and advanced memory chip industrial demand [00:07:10 - 00:07:18].
Shanghai & Mexico: Shanghai marked fresh monthly highs [00:07:33]. Mexico experienced a minor pullback from absolute highs but is cleanly resolving out of a massive multi-year horizontal accumulation base dating back to 2013 [00:07:40].
Tactical Sector Performance & Specific Equity Highlights
Barometer’s asset allocation model remains focused across four cyclical and hard-asset pillars: Energy, Financials, Industrials, and Materials, while actively holding tactical cash reserves [00:28:51].
Energy (Significant Overweight): The sector is aggressively breaking out of an absolute range that capped price action since 2015 [00:22:40]. Corporate cash flows and forward earnings power over the next three quarters are projected to be massive relative to compressed current valuations [00:23:55].
Suncor (SU): Shows extreme technical strength, printing new absolute highs and relative strength peaks [00:23:20].
Canadian Natural Resources (CNQ) & Tamarack Valley (TVE): Retained as core structural long holdings with strong technical posture [00:23:05].
Infrastructure & Midstream: Exposed via Master Limited Partnerships (AMLP ETF) and Enbridge (ENB) to capture stable dividend growth [00:42:43].
Financials (Significant Overweight): Positioned six years into a primary banking bull market initialized in 2020 [00:21:00]. While the broad financials index has consolidated horizontally for five months [00:21:08], large-cap Canadian banking displays severe relative strength. National Bank of Canada generated a fresh absolute and relative high this week [00:21:21], and CIBC hit a new all-time high during the session [00:21:28]. US money center peers like Citigroup and Morgan Stanley have experienced clean, constructive technical pullbacks to their 50-day moving averages within definitive uptrends [00:21:36].
Industrials & AI Infrastructure: Structural leadership remains intact, led explicitly by power grid infrastructure plays [00:21:51]. GE Vernova (GEV) [00:37:36] and Quanta Services (PWR) [00:38:03] are experiencing routine technical pullbacks to fill open chart gaps near their 50-day moving averages; their underlying electrical grid secular theme remains dominant. Defense and Aerospace exposure was reduced six weeks ago, cutting names like Lockheed Martin and Raytheon due to slowing relative trends [00:22:04 - 00:22:17], while core allocations in high-performing alpha champions Howmet Aerospace and Bombardier are strictly maintained [00:22:24].
Materials: Base metal and copper producers reside near multi-month highs. Rio Tinto has broken out cleanly and completed a standard technical retest of its key moving average, offering an attractive institutional entry point [00:25:07]. Gold miners are working through an intermediate consolidation phase but preserve structural price support above long-term moving averages [00:25:20].
Technology (Underweight): The semiconductor index is significantly overextended above its long-term moving average, and sector breadth officially reversed downward last week [00:25:52 - 00:26:15]. Barometer remains tactically defensive ("chicken") here, avoiding chasing tech at these multiples ahead of key earnings data [00:29:16].
Consumer Discretionary & Low-Volatility Defensives (Avoid): Plagued by poor breadth and decaying trends [00:26:58]. The baseline consumer is experiencing a clear squeeze from structural inflation pressures, causing steep weakness across homebuilders and building materials [00:26:49 - 00:27:08]. Traditional low-volatility defensive sectors (utilities, biotech, healthcare, restaurants, leisure) exhibit very poor relative strength [00:27:08 - 00:28:12]. Investors are eschewing traditional defensives because sovereign fixed income fails to provide a real structural hedge in this macro regime [00:34:19].
Client Diagnostic Q&A Session
Consumer Downshifting Trends (Costco & Walmart): Both entities are performing exceptionally well technically on expanding volume [00:32:13]. Costco's relative price strength sits above 66% of all S&P 500 stocks [00:32:38]. This outperformance reflects a systemic consumer trend downshifting to value budgets to offset inflation [00:32:57]. Both remain on Barometer's "farm team" watchlist, though the firm is not deploying new capital into them immediately [00:32:51].
Sovereign Bond Inversions during Recessions: Historically, a weakening economy forces a structural bid into fixed income and utilities. In this cycle, sovereign bonds have completely lost their bid, and the aggregate bond index is breaking down cleanly due to massive sovereign debt issuance [00:34:19 - 00:34:57]. True defensive positioning requires ownership of capital-efficient corporations with zero near-term debt-maturing rollover mandates [00:35:18].
Manulife Financial (MFC) Assessment: The broader insurance complex (tracked via the KIE ETF) has violated its 200-day moving average on a declining trajectory [00:35:50]. While Manulife exhibits a technically superior chart next to its peers, its 12-month relative strength profile has remained completely flat since November [00:36:21]. Burroughs notes that a high-conviction portfolio requires running a concentrated book of the 20 absolute best global ideas, rather than diluting alpha across 100 average market performers [00:36:30].
BWX Technologies (BWX): The equity is actively testing a critical technical support floor at its 200-day moving average on high volume; it remains an essential structural level to watch and hold [00:37:05].
Post-Midterm Election Statistics: Historical data since 1946 reveals that 100% of the years immediately following a US midterm election have delivered positive total returns, averaging a market return north of 20% [00:39:31].
Interest Rate Hikes vs. Precious Metals: In the short term, rate hikes challenge gold because it offers no native yield yield [00:41:15]. However, rising interest rates indicate deep underlying inflation risk. Historically, this dynamic supports massive multi-year vertical runs in precious metals while broader equity markets contract, mirroring the historical stagflationary bear market of 1973–1974 [00:42:14].
Systemic Stress Signals: General corporate credit risk spreads remain exceptionally benign, with the bond market requiring minimal extra yield premium to own corporate paper over sovereign debt [00:30:08]. Equity volatility remains heavily compressed [00:30:33]. Barometer is prepared to pivot significantly more defensive if macro inflation metrics or geopolitical chokepoint escalations—specifically out of the Strait of Hormuz—impair broader corporate infrastructure trends [00:31:10].
Jun 2, 2026
Finding Balance: Growth, Income and Liquidity | 1 Jun 2026 | Morgan Stanley
Host: Representative from Morgan Stanley presenting The Alts Report 00:00:32 https://youtu.be/a2W8YMcD4F0?t=0h0m32s . Guest: Troy Geski, Chief Market Strategist for Future Standard 00:00:38 https://youtu.be/a2W8YMcD4F0?t=0h0m38s . Core Man…