Stress-relief ironically provided by big-cap retreats ahead of the FOMC may have an upside. Just a thought, but despite defensive action and expectations reasonably realistic to see an 'inverted Yield Curve' as slightly likely develop next year, this day of consolidation rather than gunning for record S&P highs, is actually preferable. It was led by further hits to the prior year's high fliers.

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Essentially you can't push forward-earnings to much higher levels for big-caps it seems, but you can ease the fears of a plunge later 'this' week, based on an immediate rate hike (more likely just speeding-up the pace of tapering). Fears get tempered by having the market hold here, rather than make a new high in advance of the FOMC, which would be a more-likely set-up for a bust.

Executive summary:

• Market stability is actually enhanced by having a defensive session now, ahead of the FOMC meeting, and a generally-expected hawkish tone, so I suspect we'll rebound to sort of hold S&P in this range, but not solidly, of course risk exceeds potential on a daily basis, aside alternating swings.

• A hawkish tone is so broadly discussed that it won't surprise me if Powell uses his 'bully pulpit' in the News Conference to calm fears of a Fed trying to break the economy, he know it's the basic fear, he got himself in a spot.

• He also might reflect (if he dares) on the inflationary implications of such concerns as 'recovering' from the horrible tornado assault just days ago.

• Although hard to know their sincerity, China offered 'help' to the US in the wake of the tornadoes, of course I'm sure 'Old Glory' can fly from all the vehicles needed for recovery, though the US could thank them for a sign of compassion, and say they can help by not threatening their neighbors.

• In the aftermath of this disaster (which fortunately had fewer fatalities than feared at one point), contractors of every trade will be needed in multiple states, with seriously insufficient housing or hotels available for what will be a massive multitude of laymen and tech workers needed to rebuild.

• So much work coming that there won't be an excuse for anyone able and fit to work not having a job (not fun, but there's a moral benefit of helping out a lot of folks who are suffering), and retired doctors really could help people recover without them feeling like teaming masses seeking help.

• Perhaps it's a more macro reflection on how the 'super-storm' relates to what has become an 'angry planet', as Mother Nature's message is pretty clear in a number of ways, not worthy of debate about climate change as its reality has previously been established by science well before all this.

• Hence, regardless of political overtones sadly surrounding this, like most all issues nowadays, the takeaway from super-storm tornadoes, hurricane severity, earthquakes (which may reflect polar melting pressure shifts that change 'pressure/weight' of the oceans), fires, floods and so on, there are lessons to be gleaned.

• The main lesson is not being learned, building away from the Coasts (and that is going to be a killer for anyone trying to finance a high-rise condo or even paying cash but wanting to have insurance, as it won't be available if this trend continues), or likely building with what are called 'Dade County' building codes...that's 'impact glass, block & steel construction' and more (like roof tie-downs which likely wouldn't have helped Kentucky much).

• Nobody wants to face the idea that the 'infrastructure modernization' and repairs Government is increasingly facilitating, are the tip of the iceberg (a melted 'berg at that), if you contemplate the next 20 years of construction and relocation of more communities that like in flood-prone zones (that's not just river areas, but huge cities like Miami and Ft. Lauderdale will lose most coastal housing and I doubt seawalls will help given limestone's very porous nature, so that's why you already have seawater/briny intrusions).

• So yes that suggests a bullish continuing view on heavy construction and a slew of companies that can benefit from prolonged rebuilding, and there is concern where insurance companies distributing risk to re-insurance do reach a point where there's unable to cope with loss mitigation (not yet).

• I just wanted to mention all this, although a preference nearer-term 2022 besides the S&P, Oil and normal Index analyses, is focusing on small and mid-cap companies that are disruptive in their fields (also has risk such as how frequently some dilute or revisit funding wells along the way).

• The Fed is behind the curve, and risks being more so 'if a construction boom' occurs because of the tornado reconstruction combined with big spending projects related to the Infrastructure package, and I hope 'no' big natural catastrophe in California, or for that matter more tornadoes.

• Chairman Powell has been pretty forthright about the need to snug-up, and he is sticking to his plan even if he messed up by delay, not really in terms of moving to a tighter policy, all this was possibly delayed during a long debate over Infrastructure, but the intent has been telegraphed.

• Some have called Powell's an 'Open Mouth Committee' move, which I think is wishful thinking Wall St. would welcome; i.e., the idea that the Fed could talk down inflation without having a market impact, I doubt that.

• Tesla (TSLA) is the 'marquee stock' of the millennial investing crowd (or whatever name you prefer), I thought it was a mistake to put it in the S&P you may recall, as Tesla alone is capable of exerting an Apple-like effect, even as it's no Apple (AAPL), it's also the largest holding in some hi-flyer funds that didn't re-balance early, hence now probably puts pressure on such stocks by a few fund managers having to do so belatedly.

• Meanwhile the 'poster children' of the era of pandemic investing last year are crashing again, as we initially suggested would happen early this year and I don't concur that any of them are attractive investments now, even as that may change in the weeks ahead, but not for now.

Bits & Bytes:

In-brief notes Tesla breaking below 1000. I've been bearish on it for awhile, mostly because of emerging competitive conditions, not based on current products or sales. In my view the stock market cares about 2023 or even beyond sales, and by then expects the EV market will diversify a bit. For sure the total sales of EV's will increase, and Tesla may sell as many but their share will erode OR they will have to offer improved customer service, which a lot of existing companies can, because they have legacy dealer networks.

However, let's not pick on Tesla (or Elon 'Person of the Year' by Time). I have recently remarked again about the high flyers (or former pandemic beneficiary stocks) that got killed and that continues, despite pandemic itself persisting. I noted how some ETF's 'concentrated' in those stocks (like Cathy Woods Ark), and it's not just her, but when an ETF is sold it impacts the issues in it, more in a sense than if they were trading alone just based on their own merits.

But in any event these are the kind of stocks I abhorred, and if they collapse further, most will not be of interest, although a couple might be. Zoom (ZM), Roku (ROKU), and the like were at the top of the list (well, maybe AMC (AMC) and GameStop (GME)), but also Teladoc (TDOC) got ahead of itself, as did Twilio (TWLO), Coinbase (COIN), Bitcoin and so on, I guess I should say 'especially' Bitcoin (BITCOMP), which I focused on likely breaking.

A footnote to this might be Ford (F), which we hold (since 12) and continues very steadily in our 18-20 target zone, with higher levels down the road. No change by us, and that's the point. In the face of all the chaos it held very steady. Also while we can congratulate Rivian (RIVN) ( on their pickup truck award, we don't think it effectively competes with Ford's Lightning F-150, though it will sell well too. In fact the threat is from ones nobody's chatting about, like Canoo (GOEV), because 'if' Canoo's able to bring theirs to market, the price point will be very compelling. At the moment it's breaking it's 200-DMA, so maybe that's a daily washout.

In-sum:

S&P and even NDX, might technically be in better shape to navigate through the FOMC meeting, by virtue of current shakeouts in the big-caps and financial stocks. I was concerned of a spike to a record setting-up a possible plunge if they actually hiked, but in this case it helps take an advance edge-off too-dramatic a process like that. Doesn't mean it won't react, but less drama. 

Nevertheless I do suspect the Fed will pick-up-the-pace of their tapering and we’ll envision a couple rate hikes next year, but all that for interest rates is still at relatively lower-low rates, which the market will react too, but won’t impede business activity. A catch is that probably won’t weigh much on inflation either and thus the Fed may find itself formally hiking Funds rates a couple times in the year ahead. Again part of why our focus is 'other than' pricey mega-caps.