Nothing changes as much as it remains the same. This saying used to hang above my office door many years ago when I worked as a restaurant manager. It perplexed me at times and at other times it made perfect sense. This is how I feel about the market – perplexed and not. For example, the market action this week makes sense. It is reasonable for the market to vacillate within a range, especially when the market is pushing against record highs and the fundamentals are sound.
- The benchmark S&P 500 was on pace for its first weekly drop in five, following a weak payrolls report that reassured investors the Federal Reserve wouldn’t speed up plans to hike interest rates.
Nothing changes …
Or so it is with the breathless media. It continues to push the story line that investors are afraid of what will happen when the Fed raises its key interest rates.
As much as it remains the same …
Or so it is with the breathless media. It continues to report contradiction as fact – the S&P drops this week because investors are reassured the Fed won’t raise interest rates sooner because of a weak payrolls report in August. Does any of that make sense to you? Yup, nothing changes as much as it remains the same.
- The Ukrainian president declared a cease-fire Friday to end nearly five months of fighting in the nation’s east after his representatives reached a deal with the Russian-backed rebels at peace talks.
This is good news, and one would think the market would react kindly to the good news, but it seems the market is not impressed. The news has been out for about an hour this morning and the market is down across the board. Perplexing, no doubt, but understandable, given the weak payrolls report. Stupid people killing stupid people not doing that just doesn’t compare to a weak jobs report.
- Russia’s central bank is set to miss its target of 5 percent inflation this year as ruble weakness spurred by sanctions from the U.S. and the European Union over Ukraine ignited consumer-price growth.
Now, here is the real story today. The weak payrolls report and the Fed is a distraction and a ceasefire between Kiev and the Ukrainian rebels is only words at this point. Russia bleeding heavily from its economic wounds is worth talking about. It has been forced to raise its benchmark interest rate to the tune of 8%.
The effect of that in relation to the ongoing economic war with the US and Europe is immense. It is a blow to the bad guys and it is far worse than the effect Russian sanctions are having on Europe. Interest rates there are going the other way.
As well, Mr. Putin must understand the potential of this inflationary spiral. After all, as we have seen, the Russian people are not afraid to stand in front of the tanks in Red Square when they become truly unhappy.
Bottom line? The market is doing what the market does – it is reflecting and responding. Right now, it is reflecting on where it is at, the lofty heights it has reached and it is responding with a careful approach. Not too much too fast, it seems to be saying.
And I say … Nothing changes as much as it remains the same. As far as the market goes, this makes sense, at least it does today.
Trade in the day; invest in your life …
