It would seem that is the case right now.
We’ve had some good news in the last couple of days and it was met with a decent selloff today (6/24/14). Now the commentators are falling all over themselves trying to figure out why yesterday’s “flash PMI”: Markit, showing manufacturing expanding at the fastest rate in four years, was met with such disdain. Then there was another bad bit, er, I mean good report this morning showing new home sales hitting a six year high in May.
Also, there were reports that the Syrian Air Force was flying combat missions in Western Iraq vs. ISIS. I would have thought that might have been considered by most to be a good thing, as it might take pressure off the United States to intervene. But, the boys and girls on CNBC were having none of that, as they opined that this might be the reason for the market’s swoon.
Enter “The Hawk”, Charles Plosser
Since Philly Fed President, Plosser is always a hawk on rates, the media gave short shrift to his comments on moving rates upward in the “not-to-distant future” (due to a broader, stronger economy). I have to think that this was what was bugging the market today, and may continue to do so if stronger numbers persist. We may even get a decent correction. Regardless, stronger numbers are, in fact, good news! But, the media, when it gets the drift, will play this negative. Stronger numbers are bad, because the Fed will tighten and we will slide into recession.
What to do?
Zilch, if you own good stocks, they will continue to open their doors every morning, do business and grow, over the long term. Chances are the economy really won’t be blasting off to the moon. The current strength that we are experiencing may also be just a snap-back from the winter-weakened stats of the first quarter. Ergo, the period of more rapid growth may be short-lived. But, when the media gets on this, they will be delighted to have something to chatter about.
Energy, a final subtext to the weak market
Energy, which had been one of the strongest sectors of the market in recent weeks, buckled today. Oil prices did not. What is interesting is that for the first time in over forty years, the U.S. government is going to permit the export of oil. Good news is we must have ample domestic supplies in order to do this. I guess the bad news for the domestic producers that got cracked today is that we have ample supplies. Again, as of this writing (PM June 24, 2014), oil prices have not cracked.
Are you ready for your exam on “Good news is bad news?” Or, are you completely confused?
P.S. Great news this morning (June 25, 2014)! “U.S. economy contracted sharply in 1st quarter…” plus durable goods orders fell 1% in May. Maybe the Fed won’t have to tighten as quickly. We’re saved!
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