Daily Market Update – June 25, 2014 (Close)




Daily Market Update – June 25, 2014 (Close)

It’s often said that the market discounts the future and reflects the situation six months from now.

With another revision of the first quarter’s GDP now indicating a negative 2.9% GDP if you could go back in time by about 6 months, I would bet you that those investing would be pretty unhappy to discover that they were following a fantasy and plowing their money into that fantasy.

Except that there may now be much consequence for that kind of misrepresentation of the health of the economy. And if you didn’t believe that could possibly have been the case, just look at today’s market, which shook off early concerns about the revisions and closed with a decent gain, despite the lack of anything resembling good news.

With all of the reasons to believe that the economy had been growing, albeit slowly, the market chugged along in anticipation that it would keep going that way. Except it turns out that’s not really the way it had been going.

The real optimists would shrug this off and simply say that six months from now our economy will be even more robust than it is today and that alone makes it reasonable to invest in stocks, as it’s all about the future and not the past.

You do have to wonder whether such large revisions begin to put some seminal metrics into the same league as those provided, and regularly derided by us, by the Chinese government. Those numbers are routinely dismissed despite the fact that they will move the markets on the day of their release and then so frequently those moves are quickly reversed as investors remember that the data often has no basis in fact.

This morning as the revision came out the immediate response was negative, but that fairly quickly corrected itself. Coming off yesterday’s very surprising loss that accelerated into the close you might believe that any negative news would be magnified, but that’s not appearing to be the case.

Approaching mid-week, this is shaping up to be one of the slowest trading weeks that I can recall, especially when having so much to spend.

What I thought were relative bargains yesterday got caught up in the sell-off that characterized the afternoon and that has to be a concern for additional positions that may be considered for purchase. Given the current environment it would be nice to see something tangible to provide confidence that the market can sustain itself at these levels.

Today’s digestion of the bad news should have been one of those signs, but it just didn’t have a really positive feeling about it.

Despite assurances from the Federal Reserve that would favor stocks over bonds, the deluge of IPO offerings leaves a bad taste for many who remember that as being a clarion call for bad things to come. Certainly, for those who look at the need for confirmatory volume for any kind of move, there hasn’t been any of that sort of thing.

While there may be a basis for that belief the rise of the market has been fairly slow, regular and sustained and is
n’t the kind that could be grouped together with past speculative bubbles, it’s hard to escape that feeling.

While the Employment Situation Report hasn’t been very important lately, I think that next week’s report may conceivably become a market mover if it doesn’t significantly advance the thought that there are many more people in a position to spend their money and support economic growth.

Although I think that retail is strengthening and that should reflect increasing consumer ability to make discretionary purchases, the numbers coming along haven’t done much to confirm that belief.

With what remains of this week, I hope that there is some opportunity to rollover positions or get some assignments, but my preference at this point would be to see rollovers as a means of generating income stream, rather than adding to the already ample cash reserve.

To its credit, given the horrible revision of this morning and sell-offs in Asia, the preliminary read on this morning’s market wasn’t terribly bad, so you can never really know what awaits. 

Turning away from the stock ticker may be done only at peril, but by the same token trying to apply a logical frame of mind in understanding what is going on may be equally perilous.