I’ve used this analogy before, but on days like today, one can’t help but feel like investors are nothing more than Pavlov’s dogs, salivating for the inevitable treat they’ve been conditioned to expect. As for Pavlov, he is of course played by Fed Chairman Jerome Powell, also known as the Wizard of Oz.
Article Category: Oil
When the market collapses as it did during December, it’s usually a function of ETF and futures driven selling. Rather than going through the process of selling individual stocks, larger investors use these baskets of securities to effectively sell everything at once. This is especially true when we’re talking about short-term, algorithmic style trading.
I’ve been in the retest camp for some time now, expecting the market to plumb the lows from Christmas Eve, but the market has steadfastly moved higher. In part this is due to earnings coming in better than expected (and guidance not being as awful), but I also believe a lot of it has to do with the marked shift from Fed Chairman Jerome Powell.
This is one of those tricky times when it appears that both data and price action are pointing in a multitude of directions. Let’s go over some of the key variables.
First, to set the stage, I think it’s important to note that peak economic growth is probably behind us for this cycle. Thanks to fiscal stimulus measures that should’ve been reserved for periods of economic weakness, but were instead used as afterburners, the U.S. economy reached an annualized growth rate of 4.2% in the second quarter.
With the holiday shopping season officially in full swing, early estimates suggest that the American consumer is both in good spirits, and good shape financially. Data from multiple sources suggests that holiday spending will far outpace last year’s results.
While no one knows for sure exactly where the numbers will settle, those with insight into spending remain optimistic. Mastercard projected that overall sales on Black Friday totaled $23 billion, which represents a 9% increase from last year.