Short-term disruptions - become 'creative destruction' in the longer-run; with pockets of immediate optimism likely to be short-lived, given the backdrop so sprinkled with troubling variables; not the least of which is 'war in Europe' and a 'food famine', which might be (a most evil possibility) weaponized by Putin.
Clearly, other than hard-scrabble basing by a thousand smaller stocks; selling in the big-caps is what dominates and determines the extent of S&P purging. This market is not about 'discretionary spending' and 'pent-up' demand. That's last year's story; and the world is past that and really more splintered; while of course narrowly-speaking, the NATO alliance is stronger. The splintering has a market-related, and economic aspect way beyond better allied military unity.
I'm not trying to be too diplomatic about the 'war'; but have said since it began that Russia's not going to give back Crimea, which was Russian before given to Ukraine by Khrushchev decades earlier as a 'present'. I found the aging but still relevant Henry Kissinger's comments at Davos interesting on this subject. (Kissinger had similar thoughts to mine in regards to 'how' a peace-negotiation might divide disputed territories. He's 98 and we should all have such a grasp of geopolitics if we get to that age; agree or not with his leanings; which are not entirely super-globalist as some claim.)
'Resilient' has been an overused and inappropriately-used word to describe a market that was holding up only in the Indexes while distribution proceeded in a significant way for a long time. That's why 20% 'bear market' designations of course are meaningless; since most stocks are off way more than that; aside a few sectors like Energy / Oil. Actually the hammering on 'safe haven' type stocks is indicative of what can lead to lower levels; but that too is a process.
The risk of a 'generational bear market' is there; but requires a callous policy that is willing to destroy wealth to ease inflation. That was all along why we'd believed they were 'behind the curve' with more risk the longer they waited. In this case, with the war the Fed never envisioned going on too; something sure needs to shift favorably to avoid really hurting the Middle Class, retirees etc., and it still won't alleviate inflation much if war, drought and high Oil remain.
Now, there may or may not 'technically' be a 'recession'. My view has been it's already ongoing. The discrepancy varies between sectors; triggering factors; and even the focus (portfolio) of some banks that are more viable than others. I'm not thrilled about Banking stocks 'in-general' (JP Morgan probably better; with B of A solid); although it helps if both Oils & Banks prove resilient since there is a view that 'even after' the war, that Oil won't drop truly significantly (JPM, BAC).
Growth levels many CEO's and market analysts have guided toward; are just not achievable (nor have they been) in the ongoing challenging environment. I realize there are macro debates about globalism (such as at Davos this week) but that's not the core of the challenge right now. This is about food, fuel and funds. Not just Fed Funds. All of which are feeling freaking challenges; which will determine whether the S&P was moderately or extremely extended. All of the Fibonacci or other numbers do not mean much viewed in a vacuum.
The Fed's withdrawing liquidity; so today's news of the largest Money Supply drain in decades (actually over half a Century) is startling; and that's enough to worry even the stalwart optimists. Interestingly the S&P (SPX) absorbed this, but it does suggest something serious going on in terms of 'recession' .. hence Fed action that went from overextended fiscal stimulus; to heavy-duty restriction. If indeed most of the inflation is in the pipeline (wages and prices higher before the war); the Fed risks going beyond neutral and not move (a fear I've noted) from one extreme to another, which is what today's Money Supply warns of.
In-sum:
What's going on is sort of the ultimate 'fighting the Fed', especially if one refers to some analysts or technicians calling for S&P 4800 or 5000... it's all impossible without a complete capitulation by the Fed. I'm not saying you'll never see such numbers; but that's delusional Wall Street marketing for now; until circumstances change. At the moment we're in an S&P indecision zone at best; desperately trying to hold together above the ~3800 level.
Our condolences and expression of horror after today's outrageous shooting in Texas. What an awful tragedy that media best avoid political spins on.
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