Happy Memorial Day!
On this holiday weekend we commemorate our troops and pray for a safe Nation and fine Summer for all.
I also know this extended S&P does not -yet- reflect broad declines. Few realize almost 'half' the S&P 500 is 'down' from 10-30% since we indicated internal market highs (best represented by Russell 2000) in early March. I viewed this compelled yield chasing', combined with 'defensive rotation' into 'mundane' (parking place) stocks as a process masking distribution.
Echoes of previous cycles - whether in market patterns, or economics, really are evident in the present behavior. Margins collapse at retail; money manager psychics drift back to the 'bad news is good news' mantra; but a funny thing is likely occurring (on the way to the Forum): the outcome may become familiar.
For sure it's taken longer, and been both successful to trade but frustrating for investors; and that's because of the 'low-yield-driven' backdrop we all know so well. As this compels even risk-averse investors into more speculative tactics, it actually contributes to setting-up (what's look for next). Will mindsets turn from chasing yield while realizing there's minimal upside prospects; to preserving basic capital? Is the old phrase valid: worry about return of, not just on, money.
Ticking time bombs - actually litter financial considerations like a minefield. At the risk of being smug about risks versus opportunity in investing; it actually 'is' the plethora of 'known risks' that has traders periodically short, visualizing stock Averages as being on the precipice of a breakdown; and then yet-again, equity prices (at least 'as needed' within the key big-caps to move the Averages), bail them out yet-again. Or so it appears superficially.
On the surface, it might seem that almost any crisis, direct or indirect, that has financial implications, could bring the market down; while little could rally it. Of course that's too pat. It's actually part of why lots of shorts are active, if running nervously, because of previous little purges, brought-back by swift rebounds.
Bottom-line: problems persist. There was no fundamental or structural change in the FOMC Minutes; as analysts and economists are over-thinking the report. They are under-thinking aspects of an uplift from a market technical precipice.
There are lots of hard challenges ahead; and this time, there must be sobriety in geopolitics & fiscal policies; beyond monetary shell games.
Enjoy the holiday!
Gene
Gene Inger
www.ingerletter.com
