After a weird week for U.S. stocks – the Dow, S&P 500 and Nasdaq yet again notch new records on Friday after losing ground during the week
Inflation and growth
Do you believe stalling economic growth is a bigger threat than inflation? Right now I have less of an idea that at the beginning of the week. What is going on?
Fears of runaway inflation have been swapped for worries about a rapid slowdown in global economic growth.
As I see it there are three obvious elements in the shift of the market narrative.
What’s going on?
- Is there a perceived change in the way the Fed reacts to data. Investors appear to no longer look for policy to be as tolerant of economic over heating and rising inflation as previously thought.
- Economic growth is likely to remain strong but the pace of growth is thought to have peaked already. Slower growth doesn’t mean no growth.
- Worries the spread of the delta and other Covid-19 variants that could force a renewed round of restrictions that will weigh on global economic activity. But not in England…? Go take a look. England is open regardless of Covid variant gains.
Spin?
All I see are the arguments of inflation, interest rate hikes, slower economic growth and Covid-19 variants are all spun into a heady mix of confusion. The spin result that finally come out to benefit the market.
Reporting
Second quarter reporting starts next week with banks kicking off first. It looks like earnings are going to be hot. So, likely that will mean more gains for the market despite the underlying concerns.
Where from here – I really don’t know – but more volatility is likely.
Markets go up regardless
The markets appear to gain regardless of the narrative. Should we be worried about dot-com like tech gains we are currently witnessing – yes, probably. But more gains look likely – but through a period of volatility.
This is a weird, whacky and out of whack market!
My S&P 500 and Nasdaq shorts are looking a little bit sad!
Be careful!