Trends end, but not typically during a short holiday trading week. And thus begins the end-of-year push from Black Friday to Christmas. The question is, will the markets be naughty or nice?
Pretend for a moment you had the ability to go completely deaf to all news. Just tune it out. Then look at the market data. It looks… positive. The trends are up. IPO’s are popping big on initial trades.
So why so much pessimism?
Because so much of this has been fueled by manipulation.
The problem is, how do you know when it ends? In 2000, it ended with the Y2K piff… and about two years of drop in spending on computer upgrade cycles. The NASDAQ cratered and the markets felt the pain. All the sudden Warren Buffet didn’t look so out-of-touch after all.
Then in 2008 we tried it again – only this time it was on the bank balance sheets. Collateral crisis; real estate collapse; market collapse. Ouch.
Today, where is the bubble? History will be the judge, but it’s probably on the Fed’s balance sheet. That thing has ballooned to trillions. So what is fueling this market? Printed money? Probably. But does it matter?
Yes, it matters. Meaning, at some point, the faith and credit of the dollar will be challenged. But does it matter as investors??? Mostly if you’re not keeping up with purchasing power.
Currently, the markets are quite hot. But so is inflation. And, as discussed months ago, it’s possible the market crash does not look as traditional (yet). It could be that the loss of purchasing power makes your adjusted returns look less impressive than the 25% YTD numbers the S&P 500 have posted.
Peering out toward the rest of 2021, as mentioned, the numbers look good. And if you didn’t have to plug your ears about the news, you’d hear mixed in the mess that an infrastructure bill will be throwing more money at the economy (likely driving inflation even more). So the markets are probably happy with that in the short-term (meaning for the rest of the year).
Jerome Powell was appointed to a second term by Biden, so the Fed leadership question is now settled. The last hurdle on the horizon appears to be budgetary in Washington. And frankly, that’s mostly posturing. Any debt ceiling issue will get managed. The lights stay on. The world keeps moving.
The question is, when does the market really correct? And no one knows. We all just guess. But the guess looks likely not to be this year.
The race is on. Does the S&P 500 push higher to hit the 4850 level before year end? Or does it fade and pull bath toward the 4500 level?
This holiday shortened week is unlikely to move the needle much. It looks like Monday will open to the positive. And trading volume will likely be low this week. But with Thursday closed and Friday being a half-day of trading, it should contain any big moves.
Happy Thanksgiving everyone. Despite many problems, we still live in a blessed and fortunate land.
Now, here are a bunch of charts for you to digest with your turkey and pumpkin pie. Enjoy…
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