Not to worry … The market needs some correction and some consolidating. When it catches its breath, a second wind will energize it again …
“Be careful what you wish for” is a saying my mother taught me as a child, and I learned it well, but it appears that Mama Market never taught this lesson to her one child The Market. It seems the market is always wishing, hoping, betting on what it thinks it wants, and then it gets it, and like a spoiled child, it doesn’t want it anymore. Boo hoo …
Chad Morganlander, portfolio manager at Stifel Nicolaus & Co in Florham Park, New Jersey, said concerns about the implications of the U.S. Federal Reserve’s decision to buy more mortgage bonds was replacing the euphoria that has lifted the S&P 500 by 16 percent over the last two months.
Concerns about the implications about the Fed’s decision? “Oh my gosh, what I have I done?” the market is saying. “I wanted it so badly that I didn’t stop and think about what it would mean to actually get what I want.” Well, every choice has ramifications, every action creates ripples, and the Fed buying up our own debt is a choice with ramifications and ripples.
“The initial liquidity rush of the last three months has seemed to have reached its crescendo,” Morganlander said. “Investor sentiment around the actions of the Fed have seem to have grown remorseful.
Remorseful? “Sorry, little one. You asked, no begged for it, and the Fed was kind enough to go out of its way to give you what you want, and now you don’t like it?”
The market is a fickle creature indeed, which makes it a difficult proposition to trade it, unless you are on top of what it thinks it wants, and what might actually happen if it gets what it wants. The former is easier to work out than the latter, certainly. In any case, here we are looking at more uncertainty in the market, but as I have been saying, not to worry. Beyond the wishes and desires of the uninformed, the market does know on which side its bread is buttered, when all is said and done.
Ultimately, the market moves with certainty when one thing and one thing only happens – economic growth. The market moves with certainty when everyone is making money. And the market moves with certainty on top of that certainty when the Fed and the U.S. government show signs of reigning in our out-of-control combined debt. Now as every day passes, it appears we are inching forward on our economic recovery, and the market is responding. The question is: will the market start wishing for the Fed and the U.S. government to get a grip on our debt? Yes, I believe it will in the future, but for now, it is crying over the spilt milk. And we all need to remember what our mothers taught us about spilt milk.
Trade in the day; invest in your life …
