Weekend Update – November 20, 2016

You might be able to easily understand any reluctance that the FOMC has had in the past year or maybe even in the year ahead to raise interest rates.

To understand why those decision makers could be scarred, all you have to do is glance back to nearly a year ago.

At that time, after a 9 year period of not having had a single increase in interest rates, the FOMC did increase interest rates.

The data compelled them to do so, as the FOMC has professed to be data driven.

Presumably, they did more than just look in the rear view mirror, casting forward projections and interpreting what are sometimes conflicting pieces of the puzzle.

At the time, the conventional wisdom, no doubt guided somewhat by the FOMC’s own suggestions, was that the small increase was going to be the first and that we were likely to see a series of such increases in 2016.

Funny thing about that, though.

Data is not the same as a crystal ball. Data is backward looking and trends can stop on a dime, or if I were to factor in the future value of money based upon the increase in the 10 Year Treasury note ever since Election Day, considerably more than a dime.

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Weekend Update – September 4, 2016

These are sensitive times.

For the longest time the FOMC and investors were the closest of allies.

The FOMC gave investors what they craved.

With cheap money increasingly made available investors could do what they want to do the most.

Invest.

In return, if you believe in trickle down economics, the great wealth created by investors would then get re-invested into the economy, helping to fund the creation of jobs, which in turn would fuel increasing demand for consumer products.

That would result in a virtuous cycle that would grow the economy, with the FOMC carefully controlling growth to keep the 40 years’ worth of inflation fears soothed.

Surely that was a win – win scenario, in theory, at least.

Then came the rumors.

Those rumors were started, fueled and spread by the very FOMC that created good times for most everyone that had a discretionary dollar to invest.

The fear that those rumors of an interest rate increase coming soon, perhaps a series of them in 2016, would become reality, periodically sowed selling waves into the blackened hearts of investors.

With even the doves among the FOMC members beginning to utter tones spoken by hawks, investors knew that their glory days were numbered and began expressing some slow acceptance of an interest rate increase.

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Weekend Update – August 21, 2016

We are pretty much done with the most systemically important earnings reports for this most current earnings season.

To say that it has been a confusing mix of results and projections would be an understatement.

By the end of the week, we had our fourth consecutive week of almost no net change. Yet the market remained within easy striking distance of its all time closing highs.

Why it’s at those all time closing highs is another question, but for the past 2 months the climb higher, while confounding, hasn’t disappointed too many people even as it’s given no reason to really be hopeful for more to come.

However, technicians might say that the lack of large moves at these levels is a healthy thing as markets may be creating a sustainable support level. 

That is an expression of hope.

Others may say that the clear lack of clarity gives no signal for committed movement in any direction.

That is an expression of avoidance, so as to preclude disappointment with whatever happens next. If you have no great hopes, you can’t really have great disappointment.

I buy into both of those outlooks, but have had an extraordinarily difficult time in believing that there is anything at immediate hand to use whatever support level is being created as a springboard to even more new highs.

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Weekend Update – May 22, 2016

If you could really dodge a bullet, magicians from Harry Houdini to Penn and Teller would never have had to perfect the ability to catch them in their teeth.

Yet, we may have dodged a bullet this past week.

Forget about the fact that the stock market still seems to like the idea of higher oil prices. We’ve been dodging the impact of increasing oil prices through most of 2016. At some point, however, that will change. That bullet has been an incredibly slow moving one.

What we dodged was a second week of terrible retail earnings and continued over-reaction to the thought that a June 2016 interest rate hike was back on the table, as  Federal Reserve Governors are sounding increasingly hawkish.

Not that there wasn’t a reaction to the sense that such an increase was becoming more likely, but some decent earnings data coupled with increased inflation projections could have really fueled an exit for the doors.

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Weekend Update – March 13, 2016

While most see virtually no chance of an interest rate increase announcement at this week’s FOMC meeting, it is expected that a June or July rate hike has a 50% chance of occurrence.

Stock market investors may like certainty, but traders often like the volatility that arises from uncertainty.

In this case, however, as there may be increasing certainty of a rate hike, time may be running out for traders who have generally reveled in a low rate environment and lashed out when threatened with rate increases.

For one group time may be running out, but for another their time may be coming. That could make the next 3 months interesting as positioning one’s self for advantage in anticipation of events may be a reasonable idea.

That’s not to say, though, that the past 3 months haven’t been interesting and haven’t offered opportunities for re-positioning. So far, 2016 has been a tale of two markets, with a sharp dividing line at February 11th.

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