For anyone who is capable of remembering the sentiment that pervaded markets less than 3 weeks ago, the continuing shattering of stock market records day after day has to come as a surprise.
For those that had the conviction of their opinions, and there were some very prominent people expecting a sell-off in the event of a Trump victory, you have to wonder whether it was worse to miss out on the rally or worse to have been so wrong while in the public eye.
As that watchful eye looked at the DJIA, S&P 500, NASDAQ 100 and Russell 2000, all ended the week closing at their all time highs.
Do you remember what happened when the FBI announced that they were looking into some emails discovered on a laptop owned by one of Hillary Clinton’s top aides? Do you then remember what happened when the all clear was then given just days ahead of the election?
The conventional wisdom was that the uncertainty associated with the unpredictability of a Trump Administration was the antithesis to what the stock market needed to move higher.
That conventional wisdom was certainly reflected in the stock market’s exaggerated movements.
Do you remember the worldwide overnight plunges when it appeared as if Donald Trump would emerge victorious?
And then a funny thing happened.
After a quick 500 point gain in the DJIA when all of those earlier convictions were thrown out the window, the market has just had a slow and steady climb higher.
You might be able to easily understand any reluctance that the FOMC has had in the past year or maybe even in the year ahead to raise interest rates.
To understand why those decision makers could be scarred, all you have to do is glance back to nearly a year ago.
At that time, after a 9 year period of not having had a single increase in interest rates, the FOMC did increase interest rates.
The data compelled them to do so, as the FOMC has professed to be data driven.
Presumably, they did more than just look in the rear view mirror, casting forward projections and interpreting what are sometimes conflicting pieces of the puzzle.
At the time, the conventional wisdom, no doubt guided somewhat by the FOMC’s own suggestions, was that the small increase was going to be the first and that we were likely to see a series of such increases in 2016.
Funny thing about that, though.
Data is not the same as a crystal ball. Data is backward looking and trends can stop on a dime, or if I were to factor in the future value of money based upon the increase in the 10 Year Treasury note ever since Election Day, considerably more than a dime.
Following the past week, it should be pretty easy to know what to do when the experts chime in and compete for your attention.
You run as far and as fast as your feet can possibly take you.
It will be fascinating to walk into a physician’s waiting room about 6 months from now and pick up some seven and eight month old copies of the news magazines sprinkled around the various end tables.
I’ve always enjoyed reading those aged articles just to get a snicker over how wrong the futurists and the experts consistently demonstrate themselves to be.
Most of the time, I don’t even have an appointment or any need. I just go to do the reading and then leave when someone finally asks “Sir, have you been helped?”
From the 99% probability of a Clinton victory in the Presidential election, as put forward by the Princeton Election Consortium, or the less sanguine 60-70% probability put forward by competitor fivethirtyeight, no one of any credibility got it right.
My guess is that if these elections predictions were written by stock analysts, the probability of a Clinton victory would have been reduced to 30% the day after the election, just as price targets and ratings are so often changed after stock moving news has already done its work.
Some days we really have no clue as to what made the market move as it did, but nothing bothers us more than not knowing the reasons for everything.
We tend to like neat little answers and no untied bundles.
It starts early in life when we begin to ask the dreaded “Why?” question.
We want answers at an early stage in life even when we have no capacity to understand those answers. We also often make the mistake of querying the wrong people to answer those questions, simply on the basis of their ready availability and familiarity.
Those on the receiving end of questions usually feel some obligation to provide an answer even if poorly equipped to do so.
While the market has now gone into a 9 consecutive day decline, it seems only natural to wonder why that’s been happening and of course, some people, have to offer their expert explanation.
It is of course understandable that the question is posed, as earnings haven’t been terrible and neither have economic data. Yet, a 9 day decline hasn’t happened since 1980 and has taken the market into a stealth 5% decline.