I woke up this morning and was confronted with the following headlines (and explanations of the headlines) from the Pollyanas that run CNBC’s website, CNBC.com:
- “Dow falls 100 points after Trump’s Twitter meltdown”
- “Dollar consolidates gains before Fed Meeting”
- “US Treasury yield rise ahead of Fed meeting, 2-year rate hits 2008 high (2.32%)“
- “Gold hits two-week low ahead of Fed Meeting but seen bouncing back”
- “Japan lags peers as Asian shares close mixed before Fed meeting”
- “European markets lower as Micro Focus (a UK tech giant) tanks 55%; investors look ahead to Fed meeting”
Two Questions
Other than the comment about the president’s Twitter meltdown, did you spot the common denominator in the rest of these headlines? Of course you did … The Fed Meeting! The point I make is that we are back to the same ole, same ole … the ‘same ole’ that the media has been obsessing about for years, rising interest rates … a normal and desirable happening in a much-improved economy. The dangers of a severe double-dip recession that many had feared for years is behind us. The economy is strong and soon to be bolstered by tax-cut spending and the creation of an additional estimated $1.5 trillion in deficit spending that will be coming from lower taxes. And all we (and the media) have to worry about is a measely quarter point increase in the Fed funds rate coming out of the Fed meeting on Wednesday. Give me a break! This stimulus in the short to intermediate-term is a positive, no matter how the media spins it. This is positive even if the Fed bumps the rate another 3 time over the next 12 months as a counter to the economy possibly overheating.
Second question: How do the folks at CNBC know that the reasons they give for the jiggles and wiggles of the market are correct? The market could just be getting tired after the huge run we’ve had over the past few years … people just taking a few chips off the table. Or it could all be about the president, tweets, trade and the destabilizing effect his behavior may have on investor psyches. Who knows? There are a plethora of ingredients that make up the emotion and calculus that investors (mostly traders) use to make buy and sell decisions. To try to explain the minute-to-minute fluctuation in stock prices is of little value to real investors and a fool’s exercise to boot. Most people who deem themselves investors don’t buy the market. They buy companies.
The Market Compass
Fortunately, for those of us who own stocks, the market does not have a moral compass. If we had to depend on the courage and conviction of the leadership of our country to be ethical, honest and to do the right thing, we’d be in a deep decline. With the market it is all about a profit and growth compass.
So, Happy Monday! For now, despite Fed moves to raise rates and the media’s propensity to obsess on the issue, it looks like the market compass, that profit and growth compass, is pointing in the right direction.
what’s your take?
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