The Sky Is Falling!

Oh the weeping and wailing and gnashing of teeth! Stocks are off a mere 6.5% from their January 3 highs and investors are rushing for their crash helmets. The media is wringing its hands, practically begging for a Fed put.

Perspective, people! Just a couple of years ago in 2019 the S&P 500 was in the low 3000s. Unemployment was plumbing multidecade lows and consumer price inflation quiescent. Now we’re to believe an S&P a thousand points higher than that would herald some kind of economic Armageddon?

It’s as if investors and reporters haven’t lived through a real bear market.  And maybe too many have ignored the common sense of diversification.  Mere weeks ago they may have felt smart to put their entire nest egg into stocks, but not so much now.  Or worse, zero-dividend “growth” stocks and the latest glitzy techno-dazzle.  Or worse yet, they backed up the truck and loaded up on cryptocurrency.  Rear view mirror investing only works until it doesn’t.

The nut of the fear seems to be Fed rate hikes.  This is bit previous at best … the Fed hasn’t even hiked yet.   The bond market has though, but even there it’s actually done a couple of rate cuts in the last few days.  And unlike the Fed, it’s not just talk … these rates are already fact.

The only real problem with the stock market is that it never had any business being that high to begin with.  Moreover, as we’ve been saying, a retreat in asset prices is a precondition for relief in consumer price inflation.  So if some hot air comes out of inflated stock prices, it’s a Good Thing.

Stocks are short term oversold and due for a bounce, likely within a couple trading days.  Anything’s possible, but my sense remains that this is not the
Big One … yet …

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