So the latest jobless claims number came in way better than expected; under $500k for the first time since Covid first struck. That’s some good news, right?
Well, yes, unless you’re a stock trader — a bullish stock trader, that is.
Here’s the S&P future contract since 5 am (pt) this morning. I circled the moment the news came out, and now:
And here’s the Nasdaq 100 future contract:
Now, as any savvy trader would tell you, the day is still very young, and never put too much emphasis on initial reactions to headline news.
I couldn’t agree more. I’ve no clue how today will play out. That said, the pre-market reaction — particularly in Nasdaq futures — made perfect sense to me.
You see, the story behind the latest epic run in stocks is one of “excess liquidity.” I.e., far more cash dumped into the economy than the economy needs for its own purposes. And with central banks manipulating safe, savings rates into guaranteed losing propositions (adjusted for even the tiniest bit of inflation), well, assets (stocks, etc.) get all the love.
Yep, this is not about the price of a share of stock relative to the underlying company’s earnings. If it were, stocks — by historical standards — would be selling at lower than half-off prices.
Bottom line, if indeed the economy’s improving (it is; how could it not be with all of that pumped-in liquidity), the powers-that-be will find it difficult to leverage it as their excuse to continue to pump up markets (although they ain’t nearly done trying). And, make no mistake, that has traders on edge…
Asian equities leaned green overnight, with 10 of the 16 markets we track closing higher.
Europe’s mixed this morning, with 9 of the 19 bourses we follow in the red so far.
U.S. major averages (save for the Dow) are off a bit to start the session: Dow up 68 points (0.20%), SP500 down 0.10%, SP500 Equal Weight down 0.15%, Nasdaq 100 down 0.30%, Nasdaq Comp 0.44%, Russell 2000 down 0.59%.
The VIX (SP500 implied volatility) is up 2.92%. VXN (Nasdaq i.v.) is up 3.35%.
Oil futures are down 0.82%, gold’s up 1.47%, silver’s up 3.09%, copper futures are up 1.45% and the ag complex is up 0.42%.
The 10-year treasury is up (yield down) and the dollar is down a notable 0.39%.
Led by silver, gold miners, gold, metals miners and Indian stocks — but dragged by ALB (lithium miner), MP (rare earth miner), solar stocks, oil services stocks and wind stocks — our core portfolio is up 0.23% to start the session.
This simple line from Annie Duke’s insightful book How to Decide, speaks volumes about investor mentality, and what every so often gets them in trouble, in a big way:
“When it comes to decision-making, current conditions also play an outsized role in how we think because we have a tendency to assume that those conditions will persist.”
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