The news this week has been putrid, like Tiger Woods’ golf at the British Open. CPI was hot. PPI was hot. Talk has turned to a full 1% rate hike by the Fed on July 27th. Bank earnings hasn’t been very good so far except for Citibank.
Yet, as I write this before lunch the S&P 500 is down a little more than 1% this week. The NASDAQ 100 is down even less. With all that bad news, the casual observer would think a much deeper decline is being seen. And that brings me to an oft mentioned theme. It’s not what the news is, but how markets react. Let me say that again. It’s not what the news is, but how markets react.
In this case markets have not reacted poorly and many would say much better than expected. Even pathetically lagging high yield bonds have risen off the mat. If you want to balance that with something less than positive, I will say that the leading groups I have been lauding for the past month look a little tired. That’s biotech, innovation, software and China. At this point we do not know if they have peaked and are about to go lower or just taking a break.
I would LIKE to see the S&P 500 rally back to 4000 before its next day of reckoning comes. That makes my scenarios work better and a little easier to manage. But as we know, the markets rarely give us exactly what we want.
On Wednesday we bought TQQQ, GDX, NUGT, IJK and some levered S&P 500. We sold FENY and IJS. On Thursday we bought QDEF and more MDY. We sold some NUGT and some GDX.
New England had rain all during April and May. My grass was the lushest of lush. It looked absolutely beautiful. And now we have drought in CT with not only no sign of letting up, but a heatwave starting to build. Good weekend to sit in a pool. Whatever you do, please enjoy!
