I was in a meeting with an investor who was in a very foul mood this morning. Like some others, he bailed out of all his stocks las year just before the bottom in October believing that the world was going to crash in 2024. “Why are Wall Street-led global markets still going up?”
I calmed him down and told him that well, in a bull market, it does not matter if the news is good or bad, stocks rise. In the bear market, they fall whether news is good or bad. If you are curious, the nightmare is over and the policy outlook is significantly improved, signaling the end of the most aggressive rate-hiking cycle in a generation.
The latest US CPI report is certainly a gift to Jerome Powell and his colleagues. It was the third benign read on CPI in a row and, more importantly, the second consecutive downside surprise. The core gauge rose just 0.1% in June from the prior month, the BLS said. The bulls will argue that even a small cut in September will do a lot to shift sentiment and expectations.
I have learned that markets will always do whatever they have to do to surprise most people. For this decade, that meant markets rising when the gloom and doomers believed another crash was on the horizon. The market is always right, even if all the prices appear wrong. It must all be punishment for sins committed in our previous life.
So, is it better to just turn off the TV and read some novel? Do I know something that the big boys who probably read, write and speak better than me, do not?
Money makes the world go round. In case you are not sure, global equities took in billions of dollars riding on the bull run so far this year.
The bulls and bears can argue till they are blue in the face. For a few years now, I have been avoiding betting on really bad things happening something like another crash. Many times in my work, I have warned against alarmist forecasts which we see and hear from a number of self-destructing financial gurus.
No one is going to get fired for avoiding doing stupid things. Investors should invest when optimism is low, not high.
To the leveraged traders, three months sounds like a lifetime. To the long-term and boring guys who do not usually move in and out of positions easily, it is mere seconds. Tactically, I will be looking for some protection in the in the next three months where some investors are groping for more risk.