Weekly Market Pulse: Have We Reached Peak Speculation?


The calendar this week includes an employment report Friday where expectations are around 1MM new jobs. If that is already in the market – and I think it is – anything less is going to be hard to swallow. It will make for an interesting Friday.


As I said above, markets didn’t react much to the data last week but commodities and real estate continued their recent outperformance. Stocks were down globally with China and Japan particularly hard hit. Value stocks returned to outperforming last week but it was a tepid move. I continue to see real estate and value (small and large) as areas that can continue to play catch up versus the S&P 500. That doesn’t mean they will go up necessarily, just that they will do better than the S&P.


Financials and energy were the big winners on the week as you might expect when value outperforms.


So, have we reached peak speculation? Heck if I know. I’ve been doing this a long time and I’ve seen some wild markets in my time. I knew the 1999 market was highly speculative and it went further than I ever thought it would. I still have emotional scars from trying to short Yahoo in that nutty market. I knew the real estate market was crazy in 2005 but it kept going higher too. Neither of those ended well though and I think this period is more speculative than either of those. The hangover from this, whenever it comes, is going to be monumental. On the other hand, Jerome Powell, at least rhetorically, seems to have no interest in removing the punch bowl from this party. One does wonder, though, whether hair of the dog has a shelf life.

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William K. 1 month ago Member's comment

Housing sales have been booming because of the low interest rates on those huge mortgages, and how long will that last? Only until it ends. And then??? And many CEOs are very good motivational speakers, which helps keep investors happy no matter what. So just like that old song, "That's the Way it goes, Where it ends Nobody Knows, (but if it does), That's the way it goes." (A very old song, from the early 1960's.)

So there could be a "correction", because nobody will call it a recession or a crash. Oh Well.