Friends
So, what if I told you that the market narrative is no longer one of inflation but recession and even deflation. That’s right, in recent trading sessions we have seen interest rates tumbling, commodity prices plunging and market participants casting a longing eye towards growth stocks that typically outperform in a low interest rate, slow growth type of environment. Oil prices fell below $100 per barrel WTI today and the prices at the pump have come down in the last week or so.
Stocks sold off hard at the open with the Dow down more than 700 points in early trading. But the beleaguered growth stocks held strong early on and helped the market averages recover by the close. For the day, the Dow Jones Industrial Average was down 129 points to close at 30,967. The S&P 500 was up 6 points to finish the day at 3,831. The Nasdaq Composite Index was up 194 points to close at 11,322. Gold was down $34 to trade at $1,766 per ounce, while oil was down $8.75 to trade at $ 99.68 per barrel WTI.
So, market participants are confident that the Fed has tamed the inflation monster, so much so that recession and deflation are the bigger risk at this point. Now, I’m not so sure the market has it right. As I said last week there is a lot of wood to chop with regards to the Fed’s fight with inflation. We have jobs information this week culminating in non-farm payroll number on Friday. I’ve mentioned that we could be in a recession already and perhaps stocks which are historically leading indicators have been telling us that for 6 months. But I am always amazed how market narratives can change on a dime. This recent about face is stunning. Will it last?
Have a nice evening everyone.
