Yesterday both Adam and I had reasonably differing opinions on the moves in stocks and to one extent it the only real confirmation of one view or another, from all of us, is what the market does itself.
Adam didn’t think the reasons floating about warranted such moves yesterday while I suggested that this may be the start of a big move.
Neither of us have been proved right or wrong and that’s not what I’m getting at. It’s the need to watch what happens that gives us the clues as to where we’re likely to go next.
Stocks had a bad day yesterday and they’re having an even worse one today. If we had seen a decent bounce this morning that may have confirmed that the news and end of month were behind the moves. The fact it’s been downhill from the start suggests that there’s more going on than we know.
What’s also different today is that European bond yields are up too, where they were down or nearly flat yesterday. The PMI’s haven’t helped obviously and the economic gap between the US and Europe is widening further. Another clue is that the euro isn’t taking part so far today which again suggests that flows out of Europe aren’t entirely behind these moves either.
We know the Fed free lunch is coming to an end and we only have 3 odd months before it does. It maybe that the markets are really starting to wake up to that fact and that economies and prices are really going to have to stand on their own two feet. With rates and inflation only likely to go one way it’s a big wake up call and one that the market better get used to sharpish. The last piece of the jigsaw was to see a sustained US recovery. We’re starting to get that now and the market is really starting to believe it whereas it’s been let down before.
It’s still early days but today’s stock market moves to close out the week will be a big deciding factor in where we are going.
Keep those eyes peeled.
