Just a few days ago, Shah shared his contrarian view on Tesla’s record filled orders: the market has simply been too generous. Though the stock pops, the demand of orders are all fulfilled, and competition is creeping in. Shah also addresses what kind of effect the disappointing jobs number will have long term on markets and the economy at large… Click here to watch.
With equity markets rallying hard and fast from late December to April 30, then dipping in May, and now rallying to all-time highs for the S&P 500 in June, you’d think tons of capital flowed into equities, then some flowed out, and now more started flowing back in.
But you’d be wrong.
Investor-driven capital waves haven’t been flooding into equity mutual funds and ETFs.
Quite the opposite.
Since we’re back up near all-time highs, you might be wondering where we’re going from here.
Understanding what investors are really doing and what’s really driving equities higher is important.
Not because stocks could go higher, but because they could tank if the real driver of higher prices is killed.
That’s because the ice cream man’s promising to spoon-feed steroids to every man and market, whether they need pumping up or not.
So, go ahead and get back into the market, get all in, why not, because it’s all good until it isn’t.
It doesn’t matter that the Federal Reserve’s gone crazy, in the face of a strong economy, promising to “act as appropriate” and cut rates if pushed by the President, as well as appeasing presumably scared investors running to flight to quality trades that took the 10-Year Treasury yield below 2% last week.
What matters is catching the next leg up in the bull market, the one for stocks as well as bonds.
The Fed’s decision on rate cuts today determines everything for the markets going forward. No matter how many rate cuts the media could possibly predict, Shah isn’t so convinced the Fed will fall for it. What he sees is a much more pressing forward guidance from the Fed that investors need to watch out for. And in response, markets are moving and bustling, so Shah has his eyes on the three sectors taking over all the talk… Click here to watch. Click here to watch.
The Federal Reserve’s already proven it’s more interested in equity markets than the economy.
Under the guise of the economy potentially going to suffer from a protracted trade war with China, the Fed’s James Bullard, president of the Federal Reserve Bank of St. Louis announced rate cuts were in order, and Fed Chairman Jerome Powell said on June 4, 2019, the central bank would act “as appropriate” to risks posed by a trade war with China.
Those bullish comments reversed the market’s May slide and gave investors hope that they’d see a rate cut.
Today starts the two-day long Federal Open Market Committee meeting, and investors, especially in the bond market, but increasingly in the stock market, expect at least some dovish “forward guidance” from the meeting, if not direct talk of a shift from expectations of no action to a potential cut in the future.
But the Fed can’t rescue markets if the trade war turns into a battle royale.
What a move markets made this week! After looking like they were rolling over (again), breaking below 25,000 on the Dow Jones Industrial Average, stocks rallied as if someone lit a fire under them.
Of course, that someone was the Federal Reserve.
But we’re not out of the woods, not by a longshot.
In fact, this rally just might be a “dead cat bounce” – a Wall Street saying that means a temporary recovery from a prolonged decline, based on the idea that even a dead cat will bounce if it falls far and fast enough.
So, this is your warning: beware the latest rally.
We’ve seen many a positive headline on trade and positive development at the Federal Reserve, but does that merit the rebound we’re seeing? Perhaps, but we’re not out of the woods yet. This morning on Varney & Co., host Stuart Varney and Shah Gilani discuss Shah’s bet that we’d seen a 10% decrease if a trade deal wasn’t finalized. Shah goes on to say that although we haven’t hit 10% yet, the market could continue back down if the China trade talks remain at a stalemate… Click here to watch.