As I type, the S&P 500 Index has clawed its way back to a 4 point gain, while the Nasdaq Composite is now up an impressive, all things considered, 0.24%.

So the U.S. stock market’s back from a messy couple of days! Well, not so fast. As I type, literally 60% of the S&P 500’s constituents are down on the morning, while just shy of 70% of the Nasdaq’s members are currently bleeding.

So what gives? It’s called concentration (in these capitalization-weighted indexes) among a small number of stocks.

On a sector basis, it’s all about tech, and the defensives (utilities, staples, healthcare) this morning. The cyclicals (energy, financials, materials, industrials, commodities) — call it those reflation/inflation/infrastructure plays — are getting hammered.

Fear is that if indeed the Fed tapers, the economy tanks. Well, that’s a gross mismatching of direct cause and effect given the current posture of monetary policy. 

More on the mark it’s: If indeed the Fed tapers, markets tank, creating the kind of fear that could, in reflexive fashion, tank the economy.

Given the heat the Fed’s taking over inflation, if indeed markets hold up to the 11th hour, taper they will. If they don’t hold up; i.e., if markets crack on fear over tapering, well, taper they won’t. 

Either way, the odds that the Fed will suddenly grow the hutzpah necessary to tighten policy to a sustainably market-cracking degree are, in my humble view, exceedingly low.

Which, long-term, is a most bullish setup for the stuff that’s getting hit the hardest as I type…

Yesterday evening I began crafting a simple market narrative that revolves around the needs of the politician and the policymaker entirely (of course policy partly plays into any sound macro thesis)… And, yes, it smacks of cynicism… I’ll share it if/when I feel its worthy of publication.

Here’s the intro:

“Let’s develop a narrative that totally departs from the data, from investor sentiment, from valuations, from the technicals, and so on. Let’s develop a narrative that, in fact, is clearly more relevant to the world we live in, and the markets we trade/invest in, at this very moment.

Let’s develop a narrative around the personal needs and the desires of the politician and the policymaker. For, clearly, it is they, their preferences and their proclivities — the probabilities/odds/expectations of what their next actions would be — who market participants are intently focused on these days.

When we consider the obvious needs and desires of our subjects, we must first, last and foremost, understand their respective constraints. What must they do, or not do, to fulfill their ambitions.”