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Investing.com -- The early-November wobble in equities may be fading faster than expected, according to Yardeni Research, which argues that the conditions that triggered the downturn are already shifting.
Yardeni notes that it had anticipated weakness as the Bull-Bear Ratio signaled “too many bulls,” a setup that often precedes a pullback. The question now is whether the drop has run its course.
“Could the pullback be over already? It might be if the Fed delivers a rate cut on December 10,” Yardeni wrote in a Monday note.
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Last week’s sharp slide unsettled investors, particularly as confidence in the AI trade faltered and Bitcoin tumbled. The sell-off intensified after several Fed officials indicated they were in no hurry to ease policy, pushing the probability of a December cut below 50%.
But the backdrop changed quickly. New York Fed President John Williams offered a more dovish tone on Friday, followed by similar comments from other policymakers. As a result, the market’s implied odds of a December cut surged to 80.9%, providing what Yardeni calls the familiar “Fed Put.”
In turn, stocks bounced accordingly, with AI-linked names leading Monday’s advance. Alphabet rose 6.3%, while Nvidia gained 2%. Bitcoin also recovered from $81,180 on Friday morning back to $89,000 by Monday afternoon.
The dollar, meanwhile, has held steady near 100 on the DXY. Yardeni attributes this to robust net capital inflows, which reached $1.5 trillion over the past 12 months through September.
The market research firm pushes back against the popular view that foreign investors are retreating from U.S. assets, pointing to $492.7 billion in private foreign purchases of Treasuries over the past 12 months and record foreign holdings of $9.2 trillion during September.
Equity inflows have been even stronger. Yardeni flags that foreign private purchases of U.S. equities hit an unprecedented $646.8 billion over the past year.
“Over the past 12 months, foreign private purchases of U.S. equities outpaced those of U.S. Treasury notes and bonds,” Yardeni said.
Overall, Yardeni believes that the market’s direction largely depends on the Fed’s December call, but the flow data points to steady foreign interest rather than any meaningful pullback from U.S. assets.