My, THAT was fast.
But not unexpected. The recent wild flight of the stocks, propelled by a tax cut aimed at the wealthy that would drive the deficit up for everyone else, sailed to new heights, the moved almost directly into a "correction" where it has been shedding all those gains almost as fast as it got them.
When it started, folks pointed at a report that unemployment was lower than expected as an instigator. In other words, more people had jobs, which one would think was a good thing. In financial circles, people with jobs mean that people can get more for their work, and that costs companies more. So good job news is bad news for the stock market. Similarly, paying your people more creates concern from the stockholders that too much money is being used on the stakeholders. Now, if people have more employment, there are already dire mutterings of "inflation", held in check these many decades through keeping wages contained, will suddenly spring forth, resulting in hire prices for consumers (because, the basic tenant of economic news is always "It is bad for you."
All this is true, but a bigger contributor is that sudden pulses in corporate financials are a large-scale version of "If You Give a Mouse a Cookie". A break for companies creates expectations, and those expectations pick up speed over time, and last shorter amounts of time. A financial windfall showed up last month, the market went crazy, and the current administration claimed credit. Now comes the accounting, the market is going crazy, and the current administration is talking about a military parade.
What happens next? I can honestly say I have no clue. If this is truly about the market getting back to normal it will settle after a few more big swings, then return to a slow growth, pretending nothing happened like an addict intent on "maintaining". OR, the serious weaknesses of the current boom, further undercut by recent decisions at a national level, start a slowdown and slump as other investments outstrip the traditional markets.
I have no clue. But then, I don't think anyone else has a clue, either.
Lapidary prose (twenty-five words a day) - So, while revising to my Eddison piece I came across a striking passage that I'd either overlooked before or, more likely, read when the book in question ...
2 days ago