Okay, so am I still bored with the market? Well, yes, because nothing has changed. The volatility and the sell-off in small caps and technology make it hard for me to do my job. So, I use the time to keep learning, to get a deeper understanding of the global economy and the underpinnings of the US economy.
· “A high degree of monetary accommodation remains warranted.”
Janet Yellen speaks and the market listens … Oh wait! The market didn’t listen. It swung from up to down quite dramatically. And all this time I thought the only reason it has been going up for five years and the only reason the US economy has been moving forward for five years is the overly accommodative Fed policy of the last six years, at least that is what the talking heads and the celebrity analysts have been telling us. Yet, here we are, the Fed signals more of the same accommodation and the market flips from green to red. Okee dokee …
As to why the market is still roiling, well, that remains a mystery, other than my suspicion the bulls test the waters, the bears respond, and then the bulls become chickens. What the market is doing has little to do with Fed policy, the US economy, or earnings for that matter. All are “accommodative” at this point in time, so, again, why are the bulls so tentative?
My answer is this: sometimes the market finds itself in “no-man’s land.” Simply, no one knows if it will go down or up on any given day, so sellers are reluctant to commit and buyers are reluctant to commit. Everyone just dabbles. BTW, as I write, the market is pushing into the green strongly. Today it has swung over 100 points twice!
· The month of May can be a feast or famine period in the equity markets, but one thing is for sure it is known for volatility.
Is that right? The market is upside down and sideways because of the month of May. Maybe …
· From 1965 through 1984 the S&P 500 was down 15 out of 20 Mays; yet from 1985 through 1997 May was the best month with 13 consecutive gains.
Whatever! All I know is it is upside down and sideways and I don’t like it. So there!
· U.S. productivity fell in the first quarter while labor costs rose … Greater productivity should raise living standards because it enables companies to pay their workers more without having to increase prices, which could boost inflation.
On the other side of the above thinking is the reality that falling production could mean workers are overworked, which means employers pay more overtime, which raises the hourly rate (higher labor costs), which boosts inflation, since some seventy percent of Fed-defined inflation derives from wages. When this happens, employers hire more people to cut costs, which then allows them to keep prices stable. Just sayin’ …
Some talking heads in the breathless media suggested today the fall in the market earlier is because the international Organization for Economic Cooperation and Development (OECD) lowered its forecast for global economic growth.
· Euro zone businesses had a solid start to the second quarter of the year with activity picking up at its fastest pace in almost three years, surveys showed on Tuesday, suggesting a broad-based recovery is taking hold in the bloc.
· While Germany continued to lead the upturn, businesses in Spain and Ireland grew at their fastest pace since before the financial crisis.
Really? What exactly is the OECD looking at to come up with that conclusion? The US is expecting growth in the 3% zone and Europe is looking at growth not contraction. So, the two largest economies in the world are expecting more growth and the OECD says the opposite is true? Who to believe? BTW, as I write now, the DIJA is up over 100 and the S&P has found its way back above 1875. That makes the swing from low to high over150 points!
· The oil market is ignoring the fact that the fighting in Ukraine is intensifying.
· Despite the increase in consumption [consumer gold purchases], demand for bars fell 44% to 67.95 tons as investors lightened up. Gold production rose 7.3% during the period. Analysts forecast 2014 could be the first year since 2002 that demand for gold in China doesn’t increase.
The above is a follow up to yesterday’s look at gold and oil. Just more stuff to consider as the market goes this way and that just to make me crazy.
Trade in the day; invest in your life …
