Can an argument be made that there is too much evidence available, to the point that one can find convincing reasons to believe almost anything. Then confirmation bias takes over and what someone wants to happen is going to happen. As noted several times, no one is completely objective and those who claim they are, they are perhaps the most subjective person in the room.
The environment is exacerbated by social media where those who desire a certain outcome tends to cluster together, convincing all that what they are hoping for will occur, amplified by an intense emotional fervor.
The consistency of the past several years is the unexpected is consistently occurring. Is this result of social media adamantly advocating only one possible outcome…a recession is at hand because of monetary policy to inflation will rise considerably because of tariffs to valuations no longer matter.
All must remember that bear markets are not created by sellers, but from an absence of buyers. A basic premise of a stock moving higher is more buyers than sellers. Conversely a basic premise of stock trading lower is the lack of buyers and not necessarily intense selling pressure for the exception of the days when a company shocks the market with some negative news.
A major issue today is the massive concentration of monies in 7 to 10 companies. The amount of monies/energy required to keep prices at current levels is exponential giving credence to Ross Perot’s “One Giant Sucking Sound.” Bloomberg writes the ten largest S & P 500 stocks have accounted for over 60% of the benchmark’s gains since 2021, “a proportion that far exceeds any normality be a wide margin.”
Perhaps one of the greatest missed estimates is that of inflation. Why are tariffs not producing the expected inflation? As hypothesized, corporations massively “front ran” building huge inventory stores during the first quarter, not necessarily replacing these stores as they are worked off, to countries and corporation alike absorbing increased costs at the expense of margins to maintain or increase market share.
It is a given that inflation will rise sometime as these stores are replaced, thus the full inflationary impact of tariffs will then ultimately be felt.
Google the above statement and one would find a gazillion people confirming this view.
What is perhaps missing are the odds of other scenarios unfolding such as the largest companies continuing to absorb these costs to maintain or capture more market share at the expense of the smaller or weaker companies.
Under this scenario, would mergers and acquisitions not surge? Perhaps that is tomorrow’s dominating narrative.
There are more questions than answers. Will today’s JOLTS Job Openings data offer any new insight? Also released today are wholesale and retail inventories and a confidence survey.
Commenting on yesterday’s market activity, equites were quiet as were Treasuries perhaps waiting on this week’s earnings and data dump amplified by a FOMC meeting.
Last night the foreign markets were mixed. London was up 0.65%, Paris up 1.42% and Frankfurt up 1.27%. China was up 0.33%, Japan down 0.79% and Hang Seng down 0.15%.
Futures are nominally higher ahead of a deluge of data that may suggest that the economy is on a buoyant footing. Attention is also focused on tomorrow’s FOMC meeting where no policy change is expected, however 50 bps of easing is expected by year’s end. And then there is the slew of earnings including results from three of the Magnificent Seven.
The 10-year is up 4/32 to yield 4.35%.
