Wall Street is also a broken record today. The Fed met this week and held rates steady, but indicated that they will keep them where they are for longer than they previously thought. The market reacted negatively, and the pundits are once again yelling, “Recession is coming, recession is coming!” But is it?
The bears are back and they sound like a broken record. “We are heading to a recession.” “Inflation is back, just look at oil prices.” The Fed is likely done raising rates, “…but they are going to keep these rates too high for too long.” Finally, they remind us that Fed policy has “long and variable” lags. We know now that these experts have been dead wrong for a year and a half, but are they right now? Let’s take these points one at a time…
Last week, bond-rating agency Fitch Ratings downgraded the rating of the United States to AA+. One has to wonder about the timing of the downgrade. Why now? Where was the downgrade of banks before Silicon Valley failed? The problem with rating agencies is and always has been that they view the world through the rear-view mirror.
It has been a strange year in the market. The headlines all seem good with the most-followed broad stock market indices all headed up, but as I always say, it is what is happening underneath the surface that tells the real story. Spoiler alert: Those headline numbers have been skewed by a very small handful of stocks…
If one listens to the financial media pundits, then she would probably believe that there is always some legitimate reason for market behavior and that the market is always logical and correct. Unfortunately, that is nonsense. It is always frustrating when the market disconnects from reality, but this is precisely when opportunities are created.
