Is 'Peak Everything' A Problem?

Despite surprisingly good data on Retail Sales, stocks of all styles, sizes, and shapes took a hit on Friday. Semis, banks, small caps, midcaps, and large caps - all down. Value - down. Cyclicals - down. Growth - also down. Save the traditional risk-off sectors such as healthcare, staples, and utilities, there was nowhere to hide.

While the percentage declines weren't overly harsh, the breadth of the pullback was a little out of the character for this market. Lately, the action has tended to favor either the reopening trade or the steady growth gang. Usually, one of these trades is a relative winner while the other takes its turn in the barrel. But on Friday, neither trade worked as both fell more than the S&P 500 itself.

While one can never be completely sure why things happen the way they do in Ms. Market's game, the worry on Friday was that we've seen the peak in, well, everything.

As in GDP Growth. Fiscal stimulus. Monetary stimulus. Housing. Used car prices. Employment growth. Corporate profits. And to hear the bears tell it, there is only one way to go from here - down.

While this thesis may or may not be true, it certainly took hold late last week and traders embraced the idea that it was time for a change in the trend of both stock and bond prices.

To be sure, it was probably time for the markets to go the other way - at least for a while. After all, this does tend to be a two-step-forward and one-step-back type of game. So, with stock indices having become overbought and sentiment overly optimistic/complacent, a pullback was to be expected at some point. All that was required was some sort of catalyst - such as a change in the narrative.

Apparently, the new narrative is "peak everything" - and that's bad. Never mind the fact according to reports I've seen; the stock market often moves higher for quite some time after economic growth peaks. This makes sense as Corporate America is quite adept at generating earnings growth during expansionary environments - even after the best of times have occurred.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should ...

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