Daily Market Update – January 27, 2016 (Close)
Yesterday was a really nice day, but it came after a really bad day, both of which simply followed oil down and then up.
And so, after yesterday’s gains, we’re still closing in on ending the first month of the year with a loss of about 8%.
Make that about 10% after today was finally over.
With so many expectations for 2016 to have been a good year, because scant data suggested that the year following a flat year, as was 2015, would be a good year, we have a long way to go just to end up flat again.
The same type of scantiness of data is what the FOMC was facing, as they prepared their statement release this afternoon.
Many expected that the FOMC Statement would suggest that there is room for more interest rate increases to come in 2016 and they did just that.
There’s no question that there’s room, considering still how low rates are, but where is the data to support the notion that such interest rates are warranted? It looks as if investors may have been asking exactly that question as the market dropped about 350 points from 2 PM, until recovering some of that by the close.
So now that we found out how the market would react to basically no real news, we’ll get to see what happens when real numbers are released on Friday with the GDP..
What was a question earlier in the day and was an uncomfortable unknown was how market traders would react to news of any kind, which may have also included the absence of any substantive news.
Well, that was the case this afternoon.
With no really good reason to move stocks higher now, as earnings aren’t yet delivering any kind of boost, you do have to wonder what the FOMC has in its reserve if the economy is in need of any boost.
This morning’s futures trading is giving back a small portion of yesterday’s gain, but that’s not too surprising, considering the recent back and forth and the uncertainty associated with what may come just 6 or so hours from now.
Of course, all could be undone or irrelevant if the market continues its association with the movement of oil prices.
Those moves of late have really had nothing to do with supply and demand and have likely been driven by more opportunism than is usually the case.
While it would be nice to see oil and stocks go in their own ways, the sharp decline in oil just the past few weeks does give some further opportunity for those opportunists to step in, so I hope the association continues for a while longer.
That is, until we get to the point that many are still expecting oil to start re-testing the $20 level.
That would be a perfectly good time for investors to realize that there has to be a net benefit when the plunging price of oil is still more likely associated with a supply glut that’s driven by a glut of suppliers rather than a dearth of users.
Like most everything else that’s part of some kind of cycle, that day will assuredly come, but it has already been such a long, long time in coming.
For my perspective, each day brings that eventuality a day closer and I’m going to stay liquid for as long as the market can stay irrational.
Today, though, the market was irrational.