Weekly Market Pulse: Never Mind

I know what you’re thinking right now. If the Fed meeting was a big nothing, why did we see such big moves in other markets? Large-cap stocks were down 2% on the week and small-cap double that. The dollar was up 1.8%, gold was down 6%, copper down 8%. Crude oil was actually up slightly on the week but energy stocks were down over 5%. Platinum was down 9% and Palladium nearly 11%. Agricultural commodities all took a big hit. Large cap value stocks were down but growth stocks managed a small gain. It was almost as if the Fed actually did something. Well, actually, amid all the discussion of dot plots and timelines it was almost missed but the Fed did actually hike rates last week. They raised the rate they pay on excess reserves and the reverse repo facility by 5 basis points each. That of course means….well, not much actually. Never mind.

One thing I think most investors don’t appreciate is how much of what goes on day to day in markets is just noise. Markets don’t always move on fundamentals. In fact, I’d say they rarely move on fundamentals because most investors – and I use that term very loosely these days – have no idea what the fundamentals are. Markets are nothing more than groups of people acting on imperfect information in less than ideal circumstances with their – or someone else’s – life savings on the line. If you think people are making intelligent, rational decisions in that environment I’d suggest you spend some time in the bowels of Reddit or Twitter or even, God help you, TikTok. That will certainly cure you of that particular delusion. 

All that happened last week is that markets that had moved too far in one direction moved back in the other direction. Commodities had made a big run higher, fueling the inflation fears everyone has been talking about. Part of that was fueled by the widespread expectation of a weak dollar that I warned just last week was looking less and less likely, at least right now. The dollar bears had every opportunity to push the dollar lower, out of the bottom of the range it’s been in for six years and they just couldn’t get it done. And the longer it sat just above that level the less likely it was to fall through it. It was just a matter of time before the bears threw in the towel or the bulls got the upper hand. I’d also add that last week’s dollar move higher wasn’t any more significant than the previous move down. We’re still stuck in the same range as before and I think there is way too much uncertainty right now for a big move in either direction. 

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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