WASHINGTON, May 5, 2015 – In case anyone forgot, Tuesday was Cinco de Mayo, the Mexican holiday that is not that country’s Independence Day, which is celebrated on Sept. 16. Rather, this holiday celebrates a big Mexican victory over much more powerful French armed forces.
The French military had been sent to crush the government of Benito Juarez for a variety of reasons—mostly monetary. But on May 5, 1862, ragtag Mexican forces unexpectedly routed the superior French forces, giving the Mexicans at least a moral boost before the French returned to impose their own “emperor,” Maximillian I, to rule over that country. The Mexicans eventually got rid of Max as well. But we’re writing about stocks today, not history, so we’ll leave it there.
Wall Street has apparently decided to celebrate this holiday’s 2015 edition with a parade of negativity. ISM and trade numbers reported earlier today seem to indicate the economy is in the stall zone, while fears are growing that Friday’s employment report will encourage the Federal Reserve to hike interest rates sooner rather than later, although nobody really knows exactly when.
Or do they?
Pretty much any investment vehicle whose main attraction is income—bonds, preferred stocks, utility and telecom stocks, and plain-vanilla high-dividend stocks—are all being taken out back and shot today. Such investments tend to lose principal or face value when interest rates start going up. So the bond vigilantes and their negative pals are dumping all this stuff wholesale today.
Beginning yesterday and continuing today, this negative undercurrent in these stock market sectors is so pronounced and so pervasive, and trading is occurring at such high volume, given the generally low volume everywhere else, that we must tentatively conclude that the oligarchs and the Wall Street in-crowd—aka the 1 percent–already know something about the Fed’s intentions and are making their market moves right now, under the cover of “sell in May” syndrome.
If the Friday employment report is perceived as positive, it’s likely “look out below!” (Although we’re hard pressed to see why it would be positive, given all the Q1 layoffs out there in fracking land.
The problem with Tuesday’s trading action is that the interest-rate contagion is spreading to tech and biotech stocks. Already way overbought, these sectors are ripe for a correction, to be sure. But the selling is engulfing these areas with a tsunami of selling as well, giving and even rottener tone to the averages than might otherwise be the case.
Best thing here for the small investor is to get out of the way, minimize the impact on interest rate sensitive stocks by moving them out of their portfolios and raising cash.
The bottom line is that nobody knows what will be reported this week. Except the 1 percenters who do. And since they have a lot more money than the rest of us, we all need to stay out of their way until they finish their game. At which point they’ll take off for a summer in the Hamptons while we’re left to pick up the pieces as best we can.
What a country.Click here for reuse options!
Copyright 2015 Communities Digital News
• The views expressed in this article are those of the author and do not necessarily represent the views of the editors or management of Communities Digital News.
This article is the copyrighted property of the writer and Communities Digital News, LLC. Written permission must be obtained before reprint in online or print media. REPRINTING CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.
Correspondingly, Communities Digital News, LLC uses its best efforts to operate in accordance with the Fair Use Doctrine under US Copyright Law and always tries to provide proper attribution. If you have reason to believe that any written material or image has been innocently infringed, please bring it to the immediate attention of CDN via the e-mail address or phone number listed on the Contact page so that it can be resolved expeditiously.