|
Daily Market Update – March 12, 2015 (8:30 AM)
With another loss, albeit a small one yesterday, after having spent most of the session in the green, the market is now now about 3.7%. That’s the level of the declines seen in January 2015, when there were actually 3 such declines in succession during the course of that month. That period really stood out in contrast to the preceding 30 months or so that had been progressing in a very regular fashion, having declines every 2 months. That was reason to take notice. As the pilot episode of a basic cable show had one of its stars say “you don’t just break bad.” But in looking back there really was a black and white difference between the market’s behavior from the end of 2014 to the beginning of 2015. It wasn’t just the difference between closing 2014 at a record high and then tradiung below those highs to start 2015, it was the quality of the trading. Not only increased volatility, since we hqad seen that a few times earlier in 2014, but the rapid stacatto behavior of the markets. Not just the stock markets, but just about everything else surrounding it that can have direct and indirect impacts. While markets in such commodities as corn, lumber and cocoa may be interesting, they’re not the kind that have much impact on stock markets. On the other hand, government bonds, currencies, precious metals and oil markets do and they have been equally wild of late. It’s hard, though, to explain the behavior. Although the simple thing is to point fingers at the dislocation in the oil markets, the dislocation isn’t that clear. What is surprising is to hear so many well regarded analysts talk about being caught off guard by the trickle down effects of events, as if the impacts of a stronger US Dollar had never been studied before. Almost any middle school aged child could tell you that in an economy that runs a trade deficit that deficit is likely to increase as our goods become more expensive and competing goods get less expensive and begin coming into the country in greater numbers. So you might think that someone along the line would have already used some logic, the kind that had proven itself correct in the past, to surmise that lower prices for goods in Europe and fewer exports of goods to Europe, would have an adverse impact on the earnings of companies that have business in Europe. But as with so many things in economics, that’s just part of a well defined cycle, that you would have thought would have taken no one by surprise, especially the people that control the great majority of the stock market’s trading volume. Since most stocks of any consequence are majority owned by institutions the moves you see on a daily basis, including the ones that feel so irrational, are all institution This morning’s mild gain in the pre-open futures doesn’t bring too much in the way of comfort and could end up being meaningless as the day begins to trade for real. At the moment, recalling that in the past 2 weeks there was no justification in counting chickens before they were hatched, there is still the possibility of some assignments this week and maybe even a rollover or two. Those would be nice if they could end up happening that way, but there’s still a lot of dust that has to settle as 2015 has thus far had 3 months of trading with extremely different characters that turned on and off on a dime and without much connection to real news. Next week we get what may be a very consequential FOMC Statement release and a Chairman’s press conference where we may possibly be able to put some of the irrational fears of a small interest rate increase behind us and finally move on.
|
