First off, let me start with this. Sunday is my 40th wedding anniversary. Forty years ago, my better half lost her mind and said yes in front of a crowd of 100 people at our little church in South Amboy, NJ.
I’m not terribly sentimental about things, but it’s hard to not remember the wedding or the days leading up to it. My friend Jack from “college” ( trade school) flew in to be my best man. Well on the night before the wedding, Jack and I are in my condo, getting ready for bed and there’s a ring of the doorbell. Hmm that’s odd, it’s a cold February night in Highlands NJ, it’s snowing, and it’s almost midnight.
I went down to answer the door and there’s a truly “knock out” beautiful girl standing there, dressed like she just came back from a night in the clubs. Oh, and she was definitely “buzzed.”
She said she needed to see David, she needed to see if she could spend the night, because for some reason she couldn’t go home. Well David was the person that owned the condo before me. So I had to explain to her that Dave’s not here any longer, he moved with the military, and I hope you can try another friend.
But she was insistent. She needed a place to stay for the night and wanted in. She was pleading to come in, and then suggested she could make it worth my while. It was at that point, I started to think ‘Hey, I bet one of my goofy friends is behind this, and I’m getting set up here.” So I told her, “I’m getting married at noon tomorrow, and no I can’t let you in, it wouldn’t quite look right. “ She finally left in a huff, cursed me out and to this day I don’t know if it was coincidental, or if I was being tested somehow. Well it’s 40 years later and I guess I passed.
It’s been wonderful. Have there been rough patches? You bet. But you take the bad with the good, and in the end, it has worked out as well as I could have asked for. For all you out there that are working on 30, or 40 or 50+ years, Congrats and Kudo’s. We’ve become a rare breed.
Okay so the high stakes game of chicken continues. Not only did the CPI come in hot, the PPI came in hot. But the market ignored both and every dip was bought. They wouldn’t let it fade. Then to top it all off “The Bullard” and fed head Menard both suggested that they wouldn’t be against a 50 basis point hike in March.
Well that finally dinged the market on Thursday. The combo platter of inflationary CPI and PPI, along with two fed spokespersons suggesting 50 instead of 25 basis point hikes, knocked the DOW down for 430 points.
The soggy continued into Friday morning with the DOW dropping another 200, and the S&P and the NASDAQ likewise deep red. But then “hope sprung eternal” and the DOW raced all the way to green by 45 points during mid day. The loses in the S&P and NASDAQ were cut in half. They simply didn’t want to let this market roll over and defended it like the Alamo.
Someone’s got to blink. The Market thinks it’s going to be Powell. But Powell has said no, we’re going higher for longer. Bullard has suggested he wouldn’t be against a 50 basis point hike in March. Menard said the same. Who’s got it right and who’s going to lose?
We’ve talked about this before. I suggest that this time it’s different. Powell is not going to fold and take orders from Wall Street. But the Street doesn’t believe that. So, there’s going to be a reckoning some time soon.
The next FOMC meeting that is two days, along with a Q&A is March 13-14. So the market might bravado it’s way into that, but frankly there’s a seasonality component of things that suggests that the second half of February and first half of March can be soggy.
Now, I’m not blind. I have seen how many times this market has tried to fall apart and they’ve come in and rescued things. Since the Powell Presser on Feb 1st, 12 trading days ago, the NYSE-only session for the SPX has reversed at least 1% 18 times! 5 of them were at least 2%. That my friends is almost unprecedented chop.
The old adage is that the market climbs a wall of worry. Well it has a lot to worry about that’s for certain. But I suspect that at some point they’re going to lose this fight and we’re going to go down and test some of those October levels. I might be wrong of course, markets do some very illogical things. But isn’t there another old adage that says don’t fight the fed? There is. And this market is fighting the fed. I suggest it will lose.