It’s not always the technicals and related trading patterns from the past that trigger my reactions. Sometimes it’s just an overall perception of reality. In this case, there is simply less interest in equities leading to reduced activity in what underlies what you trade, the index futures. There’s reason for that happening today just as there was in the 1970s.
Many of you ask why I return to the 1970s so often? It’s easy, the economic conditions as well as the technicals resemble what we’re going through today. Think about it, for years post 2008 alternative investments to “growth” stocks were miniscule. Picking a stock that more than likely would increase by 10% or more was better than investing in six-month treasuries paying much less. Those days have changed and it’s reflected not only in how people invest; making these investments is reducing their interest in picking the next, great “growth” or even “meme” stock.
Uncertainty is the devil when it comes to markets moving to higher levels. When you take a look at today’s macroeconomic environment it’s obvious that inflation is here to stay. Sure, the Federal Reserves is closer to a pause if for no other reason to determine if their prior interest rate increases have been effective. It doesn’t mean that rates are going to come down.
So again, we’re stuck in the 1970s where the markets gyrated for years in a defined range. Unfortunately Burns and Miller didn’t stick with what could have been a better solution to solving the inflation problem. Until Voelker appeared things didn’t change but it took drastic action for that to happen. Without the ability to lower income taxes it would not have happened. We don’t have that tool in our “bag of tricks” so Powell may be a little challenged in avoiding a major recession and the markets are starting to realize that.
Earnings, even reduced estimates, are being missed. Future guidance, if any, is on the downward side. This scenario suggests lower prices for equities with investors taking the easy way out and sticking with 4% paper, the alternative that just makes sense. The market is tired and the futures most day, scalp and swing traders trade reflect this lack of interest. In my opinion it’s going to get worse before it gets better.
Hope you enjoyed this post. I’m just a young 68 years old; my Dad became a broker when I was 13. It’s time for me to ‘give back’ to all of you what’s in my head. It’s not always pretty but it’s based on history . . . and history, unchecked, repeats itself.
Everyone learns at their own pace. If you pick everything up the first time through, great but if not email me at dzimmer@substack.com so we can further help.
Nothing funnier than Blazing Saddles . . . hope you enjoy.