WASHINGTON, September 7, 2017 – Wednesday’s relative optimism has turned on a dime in Thursday Wall Street trading action, at least as of the noon hour ET. The Dow and the S&P 500 are off fractionally, a loss balanced slightly by the tech-heavy NASDAQ, which remains marginally in the green, at least at the moment.
The Fed’s non-committal Beige Book report Wednesday didn’t give much of a clue one way or the other as to which way the winds are blowing for that (formerly) expected December interest rate hike. Truth is, the Fed desperately wants another rate hike. But the increase in inflation they expected to see this year has yet to materialize. Maybe that’s because real people, by and large, still can’t get loans, a situation that’s persisted since Obamanation was launched on January 20, 2009.
Ultimately, prices, save for certain grocery items and the temporary, Harvey-induced jump in the price of gasoline at the pump, remain static. That won’t change much as long as salaries in this country continue to remain static, and as long as the ability of the average Joe to borrow money remains seriously impaired.
If real, actual people and young entrepreneurs in dad’s garage could get even a teensy-weensy loan from their banks, we’d all be better off. But all the money the Fed printed over roughly an eight-year period largely remains in the pockets of rich guys – the only ones who made out like bandits during the Great Recession and its aftermath. And “intellectuals” still wonder why the peasants revolted and elected Donald Trump as their president. We need to define the term “intellectual” for the 21st century.
The news from the Fed seems to have convinced investors, at least for the moment, that interest rate hikes are totally over for the remainder of 2017. Latest word is that 58 percent of economists and advisors surveyed believe that’s the case. Then again, 95 percent of the nation’s Wise Guys were convinced they’d be dealing with Her Hillaryness in the Oval Office this year. Most of us with at least half a functional brain don’t pay much heed to these pop surveys anyway, but we’re honor-bound to toss out the numbers for what they’re worth.
Add to an expected continuation of the current easy interest rate (for rich people) environment the horrific damage wrought by Hurricane Harvey in Houston and the apparently pending mega-disaster to be wreaked upon Florida and the Carolinas over the coming weekend or thereabouts, and you start to get severe damaged to the S&P Financial market sector, which consists primarily of banks, insurance companies, and mortgage REITs.
Banks had been on a tear this summer, anticipating higher revenues due to ever increasing interest rate gifts from the Fed. Perceptually at least, that game appears to be on hold, so traders are bailing out of the banks and going who knows elsewhere.
As for the insurance companies… well, with Harvey having expended its considerable wrath and with the apparently even worse Irma close at hand, property and casualty insurance coffers are going to be draining considerably over the next few months as rebuilding, refurbishing and infrastructure improvements will need a considerable chunk of coin. So there go the insurance industries earnings for a quarter or three at least. Re-insurers, too, BTW, as these substantial losses will kick in payments from this sector as well.
As an unrelated postscript to this negative news for the Financials, Dow stock Disney (symbol: DIS) took an Industrial Average-damaging hit today when the company’s current CEO, Bob Iger, warned that upcoming profits will likely not show an increase over last year’s numbers.
For us, at least, this is non-news. The company’s apparent decision to fundamentally transform its once immensely profitable ESPN sports franchise into a left-wing MSNBC clone has left that particular enterprise in worse shape than Houston after Harvey.
Combine this with lackluster 2017 movie revenues (think “Pirates of the Caribbean 427”) and now, the likelihood that incoming Hurricane Irma will wreak at least some havoc on Orlando’s Disney World/Epcot complex and there goes the Disney financial juggernaut. At least for now.
Speaking of major storms, President Trump – surely the most entertainer Commander-in-Chief ever in American history – exploded the Washington way of life yesterday. He cut a deal with Senate Minority Leader Chuckie Schumer and House Minority Leader Nancy Pelosi Wednesday to package a 3-month debt ceiling agreement with a massive Hurricane Harvey relief bill. Bang. That piece is over, at least for now. Reportedly, the GOP Hill leadership is fuming.
But then again, where’s the beef, Republicrats? A trio of RINO idiots combined to scuttle the Obamacare repeal and replace bill this past spring. You know, the “done deal” the GOP has been promising beleaguered American families and taxpayers since 2010. Gone. Poof!
And that much ballyhooed tax reform package? Looks like we might need help from the Wizarding World of Harry Potter to get anything from the GOP on this one before the next Presidential contest rolls around in 2020. So is it any wonder that President Trump decided to cut a deal with a pair of the Hill’s Great Satans?
The odious #NeverTrumpers in his own party haven’t given Trump much more than the backs of their hands since his inauguration, chortling at their cleverness for anyone who will listen. But these subpar intellects forget one thing: An electoral majority of actual Americans elected Trump in 2016 because of Trump and not because of the GOP. The party continues to ignore this simple fact at their peril. Trump was elected to get things done. Those who voted for him, frankly, don’t really care how he does it or where he finds the votes.
It’s this political fact that has at least some investors and computer programs flummoxed Thursday as they try to sort out the kind of political development they never thought they’d see or, in the case of the machines, a political development for which no algorithm currently exists. It’s also why September is likely to remain a yo-yo trading month, with long-term investors sweating their decisions as nimbler investors flit in and out of positions copping small gains here and small losses there.
The bull market is getting long of tooth, and we’re not by any means the first to notice this. On the other hand, a trend can often go on long after it’s ceased to make any sense. Today’s market action indicates that the profit-taking that’s been going on since roughly March continues, even as more optimistic traders and investors continue “buying the dips,” on days like today.
Only one of these groups will be proven right over the next quarter or two, and right now we can’t hope to guess which one. So we’re mostly on hold until we can figure out what’s really going on in Mr. Market’s always-devious mind.
If you’re currently invested in stocks, be careful here. If you’re a bit nervous, you should be. I sure am. This is not the investing universe I grew up in. That’s for sure.