Expectations expectantly expected

The market has been flying on chatter that the Fed will reduce the rate of rate increases, in spite of continued high inflation, continued low unemployment, and a reversal of two months of falling GDP, with a Q3 gain.

Fasten your seat belts.

Steve

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The bond and equities markets have other problems as well.

I honestly have not figured them out yet…but shoes will drop… :stuck_out_tongue_winking_eye: :stuck_out_tongue_winking_eye: :stuck_out_tongue_winking_eye:

Besides on wall street any news that is bad is bad in a down market. Just like any news that is bad in an up market does not matter.

I’m not skilled at this. I cannot figure out why the market reacts as it does on a daily basis. But why wouldn’t saying “Staring in December we taper off the rate increases” cause a sudden boom? Inflation is half the problem or more. Sans that everything looks so much better from a business perspective anyway. Sounds like massive “buy” signal. The question is: I know I’m missing something. What is it?

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Why not a sudden bottom? The equity market is still overvalued. There are twists in the bond market that could turn ugly.

The macro events like FED rate hikes have a very different life in the markets. The timing is not really very well correlated. The reasons for macro managing events matter more than the event.

Think of the market as the Big Tent Circus and the Fed as the Chief Clown. Then just sit back and enjoy the laughs, there is nothing to understand. :rofl:

The Captain

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Think of the market as the Big Tent Circus and the Fed as the Chief Clown. Then just sit back and enjoy the laughs, there is nothing to understand. :rofl:
The Captain

HA, I guess that’s what I was saying. But I’m hearing all year now * OH The FED! Oh interest rates! Oh another rate hike! Market tanking. So, I figured if the Fed said “Hey, we’ll ‘capitulate’ on those rate hikes now,” and it’s off to the races.

Yes I know the market is still overvalued but not THAT much. I know there’s still internal/external political intrigues but that hasn’t been driving anything except on a “shock news day” then "Who cares?" Profits, earnings, all that corporate stuff? If they slow rate hikes people & businesses will have / think they have MORE MONEY, HURRAY! and proceed accordingly. Personally I don’t know what’s been holding employment numbers up either. Less revenue, higher inflation, higher interest rates, but 3% unemployment? That is really key. No significant unemployment —> no big deal in the economy. You lower Fed rates and it’s 1982 or at least mid-2000 again, for a while.

But of course my whole point here is, I don’t know crap

I have been hearing the market is over-valued for my entire adult life - it appears that it was not until I started investing (outside retirement accounts) that this turned out to be true.

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As Agent K said in “Men In Black”: “people are dumb, panicky, animals”.

Steve

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I don’t know why this is a surprise. A decent part of the market is momentum trading, followed closely by those playing FOMO. Those hyper trading houses wouldn’t be installing vast fiber optic lines across the country if they weren’t using them to trade huge quantities of shares at lightning fast speeds to try to eke out a 1/10 of a penny difference in prices. Clearly Fed changes move markets, why wouldn’t they be reacting to that?

Now you have all the stay-at-home play with my computer types day trading, they’re going to be jumping in too.

We Fools with our little 100 and 1000 lot shares we buy and hold for more than a week are just spectators at the circus, watching the action in the 3 rings going by.

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So, in a nutshell, are you saying, yes, as soon as the Fed announces “smaller or slower rate hikes” (or perhaps just before they announce, the Market having predictive powers like Madam Zelda the fortune teller at the carnival), we will begin the next Brave New World in Stock Market Investing? Or maybe just a good pop before we get back to worrying about earnings, actual inflation (if there really is any…?) overvaluations, worldwide banking problems etc etc and the resumption of S&P500 2800?

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Sorry to read that. The business cycle has moved on…but it will be back…

It is not the event of the hike. It is the rational for the hike that matters.

The rational is several fold. The one that matters is bringing down asset prices. The wealth effect in the markets is inflationary.

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^^^^^^^^^^^^^^^^^
This.

Powell will keep raising rates until the markets are screaming in pain. You can hear the tension rising in Mr. Markets voice, and he’s started jaw boning Powell to make him stop, but the money is still there and it’s still driving consumption. All you need to know is that the most vocal posters on the Saul board are still touting their gains since 2020 despite the nearly 50% drubbing they’ve received. There is a lot of market liquidity that needs to be mopped up before this inflation beast is tamed.

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Sooner rather than later hopefully.

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The market isn’t “predicting” anything, it’s just being the market, but responding in ever faster fashion, with leaders and followers as there always have been.

It would be nice if fundamentals became the dominant issue again, but with algorithmic trading and a large cohort of FOMO day trading, the issues where that matters get fewer and fewer.

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