The Market Does What It Wants…

As I type, it’s virtually 100% certain that the Fed is going to bump up its benchmark interest rate tomorrow. This morning the NFIB Small Business Optimism Index for February was released. Here’s from Bloomberg:

the index remaining above 105 for three consecutive months indicates the continuation of a very high level of optimism for small business owners.

Also this morning we saw the release of the February Producer Price Index. Bloomberg again:

Year-on-year, overall producer prices are up 2.2 percent for the hottest rate in nearly 5 years.

Today’s releases jibe perfectly with the balance of indicators that suggest the economic outlook is bright, and with the to-be-expected attendant (albeit moderate [“the hottest” in a remarkably low-inflation five years]) inflation pressure, the Fed has a very green light to push the needle on interest rates.

So then, with upbeat economic prospects and naturally higher interest rates, you should bet the farm today that the interest rate-sensitive sectors are selling off and the cyclicals are soaring. Right? Well, nope…

At this moment, bonds are up half a percent (in price, meaning yields are lower), utilities are break even and gold’s up 2 bucks.

As for the stuff that’s supposed to rise with a good economy and higher interest rates, financials, industrials, energy, materials and technology are down .80%, .93%, 1.44% and .50% respectively. Go figure!

Jesse Livermore, whose story is arguably one of Wall Street-history’s most fascinating, and instructive — he literally made millions in the early 1900s when he followed his own rules, and blew up time and time again when he didn’t — spoke to the wisdom that ultimately told of his own undoing:

The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.

While we can’t know that this go-round the stuff that makes sense — given the perceived conditions we find ourselves in — will ultimately be the stuff of reality, one thing’s for sure, in the near-term the market will do whatever it wants, for whatever its reasons.

My best guess is — given the present setup — that a little (or a lot) selling into the news may prove healthy in the weeks/months following it.

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