The Four Dimensions Of The Fake Money Order

“If you don’t know where you’re going, any road will get you there,” is a quote that’s oft misattributed to Lewis Carrol. The fact that there’s ambiguity about who’s behind this quote on ambiguity seems fitting.

For our purposes today, the spirit of the quote is what we’re after. We think it may help elucidate the strange and confusing world of fake money in which we all travel.

For example, the monetary policy outlook immediately following last month’s FOMC meeting was as clear as a flawless (FL grade) diamond. The principal message, if you recall, was that inflation was muted and the Fed, after suffering an overt beating from President Trump, would soon be shaving basis points off the federal funds rate. You could darn near take it to the bank.

Wall Street took the news and acted upon it with conviction. Investors piled into stocks and bonds without pausing to take a closer look for imperfections.  Why worry when fortune favors the bold?

From June 19 through Wednesday, July 3, everything held up according to plan. The S&P 500 rallied 2.5 percent to close at a new all-time high of 2,995. The yield on the 10-Year Treasury note, over this period, dropped 13 basis points, as mindless buyers positioned to front-run the Fed.

But then, in the form of Friday’s job’s report, several feathers of imperfection were identified. According to the Bureau of Labor Statistics, the U.S. economy added 224,000 jobs in June. This far exceeded the consensus estimates of 160,000 new jobs. As this week began, doubt and hesitation crept into the market.  What to make of it…

Powell Stays on Point

To begin, in today’s fake money world, clear thinking and honest appraisal are handicaps for investors. What’s really important is the inverse relationship between the economy and the stock market. Good economic reports are bad for stocks. Conversely, bad economic reports are good for stocks.

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