Heads you lose! Tails you lose!
Today’s post is a micro-market history of the first four months and six days of 2015; and, what the bears obsessed on.
Coming into the new year things looked really dire to the bears. They were concerned about the precipitous fall in the price of oil. They said it was not about overproduction (my contention in, “What really worries me -11/12/2015). No, it was the tumbling price of oil signaling a worldwide drop-off in demand–an imminent sign that a global recession was on the way. Also, worrisome was the huge loss of jobs in the energy sector and its deleterious effect on the US economy. I disagreed in: “What’s so bad about cheap oil?” Oh yes, this was all taking place as the Fed was imminently ready to raise interest rates–awful timing. To put the cherry on top this lethal sundae, Greece again was to make its oft-anticipated exit (excuse me, Grexit) from the Euro/ Eurozone. The only question left to be answered was, ‘should I drink the Hemlock now, or take it before bedtime?’
These fundamental issues had the market scared. At the end of January, the German 10-year Bund was trading with a single digit yield (the yield even went negative briefly). The US Treasury 10-year note traded as low in yield as 1.6% (it had closed 2014 at 2.17%). Of course, all the major stock indices had tumbled from their December highs.
Scary stuff, eh?
The worst did not happen!
Oops! Yes it did! Things got better!
Oil rallied back up over $60 with the obvious bad consequences–these higher prices were inflationary, threatened to throw any consumer recovery off the tracks and raise the cost of fuel for all manner of transportation and manufacturing concern. Plus, Greece did not make the Grexit, giving us something to worry about later on this year.
The economy did not collapse: and, in the absence of the abject terror of late January, the 10-year US Treasury yield bounced back to 2.25% (before settling back to 2.17%–where we started the year). This is bad news too, because higher bond rates (with the Fed soon to push short rates higher) will surely damage the economy.
Despite mountains of evidence to the contrary, in the “bear game” an investment in stocks just can’t win. Heads you lose! Tails you lose!
What’s your take?
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