“All the news, all the time” is a tagline for more than one news outlet, and in this, the ubiquitous 24-hour news cycle world, it is appropriate.
Do you ever get the feeling that there is too much news, though? Let me clarify. There can never be too much news, meaning, legitimate news that informs, educates, and, yes, entertains, but what we can get too much of is repetition, opinion, and outright manipulation that passes for what we all call “news.”
- Ireland and Spain, which have been through the wringer of austerity programs and Germany and the European Commission slapped down talk of a third financial rescue for Greece as premature, after Spain once again suggested on Wednesday that a new aid package for Athens was almost inevitable.
In the short term, the market moves on the news, even if it is not legitimate news. Mostly, though, the market takes in all manner of news, and, eventually, digests the important news and discards the nonsense, even if it has temporarily acted on it.
- A gauge of growth in the U.S. services sector was modestly stronger than expected in February, helped as an index on employment rebounded from recent weakness. The Institute for Supply Management on Wednesday said its services index was 56.9 in February, up slightly from 56.7 in January.
As it digests the news, rumination occurs, which means when the news finally gets assimilated into the market’s consciousness, it has meaning, and, thus, a legitimate affect.
- The survey’s employment index jumped to 56.4 from 51.6, moving from its lowest level since February 2014 to its highest level since October.
In the meantime, as the news is rolled about, churned up, and regurgitated, the market moves about accordingly, and, sometimes, the reasons for the movement are not clear. So, we folks who talk about market movement find ourselves not understanding the reality behind the movement, so we give our best guess, and what comes out of that is a cacophony of voices all singing different tunes, which creates a lot of noise, for sure.
- Stock prices around the world fell on Wednesday on profit-taking, while the euro dropped to an 11-1/2 year low ahead of a European Central Bank meeting where policymakers are expected to offer details on their bond purchase stimulus plan.
For example, today’s market movement, in my take, is all about the market not quite ready to digest the new record highs. When it finds itself in this position, especially in conjunction with the news cycle pushing every detail and nuance of the news ad nauseum, it tends to be less than enthusiastic for going forward, but not quite scared enough to run backwards. Simply, it begins looking for equilibrium, balance if you will.
- The most accurate forecaster in last year’s Reuters foreign exchange polls expects the continued dominance of the U.S. dollar and a plethora of policy easing from global central banks to keep currencies in a narrow range in 2015.
So, what one looks for in the news are nuggets, items that are not over-produced, hammered, or otherwise misshaped, nuggets such as the two immediately above regarding the euro and the US dollar.
What those two items tell me is that there is good news and bad news coming, but the good news will be longer term and the bad news will be short-lived.
The good news is just what Europe, or at least the Eurozone, wants – a weaker euro. A weaker euro will allow others to buy less expensive European goods, which will allow for more traction in the overall European economy.
The bad news is a stronger dollar will continue. Remember, money continually flows from one market to another, especially in the forex markets. Eventually, though, as Europe gains economic traction, money will flow back to the euro and away from the US dollar, even with QE. Just look at what has happened to the US since 2009 and that with its historically massive QE.
Now speaking of good and bad news …
- Former Russian prime minister Mikhail Kasyanov calls ”brazen” murder of opposition leader Boris Nemtsov a ”turning point” in Russia and says changes are ”unavoidable”.
The bad news is Russian politics has not changed much since the days of the dictators. In fact, one could argue that the days of the dictator never really left. The good news is that this horrific murder moves the Russian people one step closer to finally throwing off the yoke of megalomania and poor economics. Maybe, sooner rather than later, the news will be about Russia coming back into the world fold, a good guy contributing not causing trouble.
Trade in the day; invest in your life …
