What Is the Market Afraid Of?
Last Wednesday, I mentioned Dr. Gary Dayton’s article on the “experts” who predict market movement (Predicting the Market: Are The Experts Really Expert?), and then on Thursday, I wrote …
- It appears we are back to the days of the market wanting to go up, struggling with the latest news, but no longer running away. True, nothing is certain in life, save death and taxes …
Well, it is true, nothing is certain, as today the market is running away from the news, and along with options expiring today, the downward move is wholly exaggerated. Nevertheless, on Friday, the market ran away on fear, and just when I thought it had settled down to an everyday tug of war about up or down, you know little moves this way or that.
- U.S. stocks opened lower on Friday, with investors concerned over reports of a regulatory crackdown on over-the-counter margin trading in China, a move that potentially would be negative for a recent flow of money into Chinese exchanges.
Actually, the above news is good news, but traders don’t see it that way. Any regulation is bad regulation, even if it is done to protect the market from itself, as is the case in China. Do you remember back in 2010 and 2011 when the rush to buy gold sent the price soaring? Well, one ramification of that artificial, hyped-up move in gold was that all of the sudden, folks were selling their great aunt’s gold necklace to get in on the move up. Well, this is what has been happening in China with the equity market. The little guy was selling his great aunt’s gold necklace to get into the rising equity market, and that, my friends, is a bubble forming. The Chinese government is merely trying to save the Chinese equity market from itself.
- Worries that Greece may run out of money as debt repayments loom also spread through credit markets.
And that tiny little country with an ancient history is at it again. Greece will do what it takes to avoid bankruptcy for one simple reason – Alexis Tsipras will be out of power because he was elected to make life better for the Greeks. If that country goes bankrupt, life will not be better for Greeks. He is looking for the best deal he can get, but he will make a deal.
- The share of economists projecting the Fed will wait until September more than doubled to 71 percent in the latest Bloomberg survey, from 32 percent last month. Team June shrank to 12 percent from 45 percent in March. The camp calling for a July rate hike fell to 5 percent from 12 percent.
Six months ago, the above news would have trumped both China and Greece, yet here we are – a stampede of fear. I guess the Fed card has been played so much the market has come to see it is inevitable, baked in to the cake, to be trite.
- Emerging market stocks hit a new seven-month high and headed for their third consecutive weekly gain.
Well, at least emerging markets rising is one positive from the now consensus belief that the Fed will hold off on raising rates, even if inflation is ticking up, and that is a number the Fed pays attention to closely, oh so closely.
- U.S. consumer prices rose for a second straight month in March as the cost of gasoline and shelter increased, signs of some inflation that should keep the Federal Reserve on course to start raising interest rates this year.
Even with the breathless media’s persistent selling of bad economic news, the US economy is still moving forward, and the US consumer gets that, which is an important leading indicator, perhaps, the most important leading indicator.
- U.S. consumer sentiment rose more than expected in April, a survey released on Friday showed.
Yup, the above is the second highest reading since 2007. On top of that, President Obama is now receiving his highest marks on the economy since 2010. People are feeling better, as good jobs become available and wages rise, and that translates to a better economic future, but the market is missing this as it ran downhill as fast as it could on Friday.
- General Electric Co’s quarterly industrial earnings rose 9 percent, helped by cost cuts that expanded profit margins, as the U.S. conglomerate banks on manufacturing of jet engines, turbines and other big-ticket products as it unloads most of its finance business.
GE is betting on selling lots of big ticket items and, apparently, it has been selling lots of big-ticket items. Now, if the largest multi-national corporation in the world is right, well, that would mean more manufacturing in America, which would mean more jobs, yadee, yadee, yada …
And there we were … the market was afraid of what?
Trade in the day; invest in your life …
