So, interesting phenomenon happening in the stock market these last few days with the S&P 500 dropping over 5% (around 1,400 points) and even dipping below its 200-day moving average. In the right circumstances, this might be the trigger of a full-on rout in the stock markets.
Here is what is missing though: panic.
Markets Down – Does Anyone Care?
I’ve been subtly (and not so subtly) hinting for about a year now that I think the Federal Reserve is too set in stone on its course to raise interest rates in the face of little to no inflationary pressure. To me, this recovery, as long as it is, doesn’t seem that strong. As such, one rate hike too many, could spell disaster.
With this week’s market reacting poorly to rising interest rates in the bond markets, I was dusting off my “I Told You So,” posts. But, it looks like I’ll have to wait a bit longer.
Despite the fairly big numbers in the Wall Street sell off as late, there isn’t much fear associated with it. When it comes to the economy, nothing matters more than how people FEEL about it. That’s why they try so hard to measure those feelings with thinks like sentiment indexes, and the like.
Unfortunately, measuring how one person feels is tricky, you can imagine how it is when you are trying to measure millions of investors and participants in the economy.
For my part, all I can do is measure what I see and hear around me. That’s a bit larger than it once was, thanks to social media, and websites like this one, but it still isn’t statistically valid. That being said, if you get a big enough chunk of the right people, your approximation can be just as good as the real thing.
My approximation right now has everyone looking at this current market downturn as a, “Oh, yeah. We knew that was coming sooner or later.” In other words, long-term investors, and others are shuffling their decks, but are not running for the exits. That means without another push down the hill, this MIGHT be all we see of this little downturn — a few days of market declines (albeit big ones), and then back to normal.
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If, and that is a very big IF, that’s how things go down, then turn 100% of your attention to housing. Rising rates mean rising mortgage rates, and if there is a way to pop this long-term economy, it’s to send everyone back to their bunker mentality regarding real estate.