“The best way to fight a bully is with confidence, it drives them crazy”
-Me
Today marked the
first day in a while were the market traded tired rather than in a volatile
frenzy. Much had to do with the constant back and forth between politicians and
Fed Chairman Powell serving more as a political platform and distracting from
what Chairman Powell was talking about. And on top of that the financial media
seemed fixated on the newly minted Pindudes (as I call them) and their rallying
cries of bashing criticism of the investing establishment and self-aggrandizing
of their own limited experience. All of it more entertaining than interesting
and of little distraction for one reason, been there, done that.
Markets
This week the biggest
move was on the back of the Fed comments that were accompanied by decent
economic data. But as both have to be taken in stride, the Fed is in a
confronted space and the economic data that comes out is more a reversal of
recent data than a predictive case for the future economy. Overall, the markets
traded in more of a thoughtful manner than usual as it appears by most measures
that reopening could meet pragmatic expectations, but more information remains
to be seen. But as the broad indexes continued their upward trend the
S&P500 almost went into the black for the year. This probably had something
to do with growing investor confidence, but also as we get closer to the
extended tax date, July 15th, it can be expected that new cash
placed in IRA’s and other qualified accounts are also contributing. Overall,
the market remains technically overbought, but need only to chop around for a
few days to work off the pressure and resume it’s more positive tone. And in my
opinion, I see little reason why it shouldn’t.
Economics
First Fed
Chairman Powell commented that the Fed was prepared to maintain the current
strategy of low interest rates, the purchasing of bonds and intervening in
other ways, should it be necessary. The markets took the news negatively and gave
the pessimists some vigor. However, as soon as yesterday’s Retail data for the
month of May was released, coming in with an increase of 17.7%, but actually
higher as the previous 2 months were adjusted higher as well. Overall, 20% was
not expected by economists, but the markets welcomed it. But it didn’t stop
there as Industrial production activity increased by 1.7%, the implication is
the reopening of the economy will have a broad impact. As recorded above the
genuine recovery is months off and more data will be needed, not just to
rejoice or displease, but to present a more consistent pattern than what we now
have. This week more data on jobs will come out and patience has never been a
more precious strategy.
External
Events
The markets have
been able to avoid the distraction of the external events from reopening
concerns, protests, and the reappearance of the concerns regarding the second
wave of the virus. And I’ve often suggested that the endless tone of criticism
is the strategy for disseminating the news. But now the distraction has hit
home, with the Pindudes hitting Twitter to criticize nearly everybody and
everything about the investing establishment while suggesting their now well
documented leader wallows in his self-proclaimed genius. I find all of it as a
curious source of activity, but with no real application to anything that I do,
also amazingly easy to ignore. In part, because I’ve often criticized
many of the same establishment during my career, but also because the Pindudes
are engaging in frantic long/short trading, a speculative game welcome by the
young, as I was once, who are incentivized by the potential to take a small
amount of money and grow it quickly. That is until the first time I lost it
quickly and that’s where I remind the Pindudes; do you really think you
invented trading and technical analysis? If so, the outcome will be as elusive
betting on sports or politics. As I always point out, if anybody has ever
figured out how to game the stock market, we’d all know who by now.
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