"the FED is no longer out of the picture here..and my guess is after the election if things continue on this upward path, they may raise rates again..."
Interesting theory...and recently a hobby of many -- guessing the economic future. That said -- a question: Upward path? Why? Inflation? Core PPI? Oil? Seems you are assuming the absolute worst. Maybe it will come to fruition, but seems just as "loaded" as the bull posts at the top of the cycle claiming "all is perfect." With all the warnings it seems clear the economy is indeed slowing. The consumer-related areas of the economy (including the consumer internet segment which has been absolutely decimated) have been -- and probably will continue -- NOT to be the place to be on the long side. Lots of this has NOT filtered down yet. But it will. It always does. And those monthly numbers will cause some nice rallies -- u can bet on that (unless something NOT currently priced into the market -- like war -- occurs). Anyone investing in Sears, Home Depot and Wall Mart should not expect nice gains anytime soon. Sure, the labor pool is still tight, but so far there has been no indication this will cause a ramp in inflation. And even hawkish members of the FED are talking up "productivity" as a check on inflation. Granted, the FED does NOT want to see "asset inflation." That said, MPPP at 100 is not an issue now...(and should not have been an issue in February -- but for the shameful greed of the underwriters). In this environment the FED simply cannot raise rates without seriously running the risk of a prolonged recession. The problems that "frighten" you so much may very well mean no LOWERING of rates...and that wish was likely going to be used as the pretext for this year's end of year rally. Now the houses will have to look elsewhere. And look they will. Money needs a place to go...and bonds are not yet a viable alternative.
All this said, there is no doubt whatsoever that the averages have been VERY weak for weeks...and in a general downtrend for months. The DOW and S&P may continue their weakness as the effects of the slowdown continue percolating through the economy -- particularly the consumer sectors, very well represented in the DOW and S&P. On the tech side, questions about the chip cycle keep investors leery. That may continue a bit as consumer weakness may hit here as well. Or maybe not. Hard to tell yet. Other areas of technology show no signs of slowing whatsoever.
What does all this mean? Nothing much, except, perhaps that the market does not actually know where it wants to go. FUNDAMENTAL events will likely be determinant. Did we turn on Friday? Wish I knew. Just don't think its really possible to know quite yet. All this said, there is a heck of a lot of money still short -- and that is possibly a very strong reason why any coming market weakness will be muted...and any strong rallies will be all the stronger. JMHO
Gonna watch the Birds now. ;) |
