sell off

Take a Deep Breath, Relax

Ok, we made it. Take a deep breath, relax.

The market is not going to zero. Widespread selling did not trigger a cascade effect.

Furthermore, the algos did not ruin the world. The computers played nice. In the end, it was an orderly re-balancing. The market had truly gone too far, too fast.

We were well past time for a breather. A reality check. We got one. Now, cooler heads prevail.

The S&P 500 rebounded nicely yesterday, up 46.20 or 1.74% to close at 2,695.

At writing, S&P futures this morning are off 15.75 at 2,678.

Here’s one possible explanation for what’s going on:

The economy’s strong by any measure you choose to use. Money’s flowing. Folks are working and cashing checks. People are spending. Things are humming along nicely.

But a hot economy, strong labor market, and rising wages also mean… inflation.

A foreign word? Some strange concept from another dimension? No. Inflation means higher prices. Been a long time since real inflation “fears” gripped the market.

Today, we take a look at what it means to you. First a quick, informal poll:

You made it through Friday and Monday without selling everything? You hanging in there? Take a deep breath, relax. Then tell us what you think. Write in to the address below:

Your Rundown for Wednesday, February 7, 2018…

Money’s About to Get More Expensive

Now that the dust has settled from the madness of the past few trading days its appears to be back to business as normal for the market. Or is it?

Many of our experts here at Agora Financial believe the recent correction was not only long overdue, but actually healthy for the stock market.

The Dow erased over 95% of Monday’s losses yesterday, closing at 24,912, an increase of 2.33%.

The Friday to Monday sell-off can, at least partially, be attributed to reaction from last Friday’s jobs report. Which was so good it lead to…

Renewed chatter about the Fed’s plans to raise interest rates up to three times in 2018. Which would make money more expensive.

Which, combined with a hot economy would give us inflation. Really rough view of the big picture, that’s what led to “inflation” in all the market headlines on Monday.

Wage growth specifically as this chart from Bloomberg shows, is going gangbusters:

Inflation, Wages Beating Expectations

Wages up, prices up.

According to a recent research note sent out by JPMorgan, the concern among some experts is that inflation will climb faster than expected:

“It’s still too early to reallocate, but it isn’t premature to hedge,” said the note. In the most JPMorgan-esque research note-like language possible.

For the time being we could see more sideways action as the market finds a cruising speed and adjusts to pending rate hikes.

Our own income expert Mike Burnick notes that one possible scenario “is a seesaw trading range, where stocks move sideways for some time, but with more volatile up-and-down moves mixed in than we’re used to seeing.”

Fast inflation or orderly inflation ahead. Two rate hikes or three rate hikes. Any way this pans out, the economy’s structurally strong.

And you’ll remember our conversation from Monday — the economy and the market are two different things.

Trade smart and be prepared for anything. Now, turning to the markets this morning…

Market Rundown for Wed., February 7

S&P 500 futures, as mentioned, are off 15.75 this morning at 2,678.

Oil’s at $63.20.

Gold’s up ever so slightly at $1,327.

Bitcoin, according to CoinDesk, goes for $8,121 this morning.

We’ll talk again on Friday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown. Aaron’s been with Agora Financial/Seven Figure Publishing for 13 years. He's been covering technology and markets for over a decade.

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