Is Another Breadth Thrust Needed To Keep The Party Going?

1.) HIRING – There is a lot of worry about employment and hiring these days. Low hire / low fire type of environment. But Earnings Per Share (EPS) growth is something to watch. EPS is not only accelerating in the US tech sector but also in the equal weight S&P 500, which should be supportive of hiring sentiment. This chart compares year-over-year changes in U.S. job openings (JOLTS) and forward-looking corporate earnings (S&P 500) from 2012 to early 2026. Both lines generally move together—rising during good times, plunging during the 2020 pandemic, then surging afterward—but recently they've diverged: job openings have slowed sharply (even turning negative), while expected company earnings growth has started picking up again. This should give rise to expectations of hiring picking up as well. This is good news for workers…but not something that would allow the Fed to cut rates either. So, as citizens, we welcome more hiring…as investors, it gives us reason to be careful and aware.

2.) YIELDS – G7 government bond yields have surged to their highest levels in more than 20 years, mostly due to inflationary pressures from high energy costs, persistent large government deficits that require ever-increasing bond issuance, the end of QE (Fed quantitative easing), and investors simply requiring higher yields to combat that inflation. So how can equities keep ignoring those higher bond yields and geopolitical stresses? Money supply. They keep printing, so global money supply keeps rising. In my opinion, that is government-mandated theft since all it really does is increase inflationary pressures, and the ones that really benefit from all the money printing are those closest to it. As investors, we simply recognize it and position to benefit from it as best as possible. Yields will do what they do in an increasingly inflationary environment… go up. We’ll watch the flows, including, and importantly, global money supply because until that significantly changes, equities likely keep a tight floor. What happens when global money supply contracts? Look at the chart below and the 2022 cycle. Markets (flows) tend to follow money supply.

3.) THRUST – On most days, the S&P 500 has a handful of stocks hitting new highs. Occasionally, something unusual happens. More than half of all 500 stocks hit a new monthly high on the same day – all at once, across different industries, different sectors, different market caps. That’s called a breadth thrust. There’s a specific threshold – 55% of stocks hitting new highs simultaneously – where the market essentially flips from unpredictable to reasonably predictable. “The Flows” show up in force. We got one of those in the spring of last year. Historically, most market gains come during a time when that “thrust” window is open. That window “expired” last week. Now, just because the window closed doesn’t mean the bull market is over. It means the market has to prove it can keep going without that “thrust” tailwind. Simply, I just want to see more stocks making new highs together and money flowing broadly across sectors instead of crowding into a small handful of names. So far, so good. However, a warning signal would go up if the rally narrows – fewer stocks leading, more stocks struggling, the indexes propped up by a shrinking group of giants. This is where having a systematic investment process, one that can understand market flows, is so valuable. Stay tuned.