This is a “mattresses day”. And that’s what yesterday turned into. In yesterday’s pre-market I’d read the action as moving towards safety (although some odd action in bonds), but by the end of yesterday, not only were bonds down, but so was gold. This is a continuation of the “stuff the money in the mattress” approach. Money is flowing into the US but it doesn’t seem to be going anywhere. We have the market tanking while bond prices are falling. (Or interest rates rising since bond prices and rates are inverses of each other). Nothing is working except individual names, as traders view long term growth as being in jeopardy.
Overseas the action is even worse because gas prices as well as crude prices were moving higher. Although natural gas is down from it’s December high, it popped up about about 2.70 to 3.10 in a couple of days.
The series of events goes something like this. If the closure of the Straight of Hormuz persists, or Saudi facilities are hit, or Iranian facilities are hit, that causes fuel prices to increase. Along with Ukraine hitting Russian supplies to choke the Russian war machine. That will drive inflation, causing the Federal Reserve to raise rates (more on that in just a second), which will slow the economy. But, at the same time that’s happening, you have a slow down in the general economy. What Jamie Dimon calls the “meh” economy goes to a blah economy. And thus, you get oil-shock, 1970s, age of disco cost-push inflation at the same time you have a weak job market… STAGFLATION.
What makes me worried about the health of the credit markets (which can cause a recession just fine, all on their own), is the participation of the Fed in the Repo market. The Fed is looking for new tools beyond the Fed Funds rate and maybe adjusting liquidity may be in that toolkit. Or maybe they’re worried about the cockroach problem. Dunno. Nominally, it’s to help maintain the target Fed Funds rate.
What we may see on Friday is a “weak” payrolls number. But what also has to be kept in mind is that the US population isn’t growing. It’s flattening off and may actually shrink in 2026, as we terrorize brown people working here without papers. Or even with papers. Or even who are citizens (killing them with impunity). And it’s aging. If we have no new immigration and Gen Z ain’t gettin’ bizzy, then we will become older as the millenials push into their 40s. However, the market may react negatively to a flat, or slightly negative, jobs number, even though that keeps us at full employment.
At the end of the day, no one has a crystal ball. Trump may walk in to the situation closet at Mar-A-Lago on Friday and say “enough is enough” and bring this to a halt. He is tired of all these briefings and Pete Kegsbreath doing pushups during meetings. Or he could go for a month. (Either way he’s not going to get his fat ass over to Dover for the dignified transfer). No one knows. But the longer it goes, and the more oil prices rise, the more damage it does to the economy. The more it pushes on inflation. And more traders and investors will take new information with a negative lens, focusing more on how it adds to the problem. The result is a down market and a down economy.
I wouldn’t say every day this goes on, but every week it goes on helps push the US toward recession. And it will likely drive Europe in that direction even faster. As this impacts not just “price at the pump,” but everything from how much people are willing to take a vacation to the cost of getting a box of Wheaties to your table. On top of that, the administration is making it hard for everyone but Israel to be a US ally. Countries we need to be with us to deal with everything from economic growth to terrorism. And unlike Russia and China, who basically told Iran ‘that sucks,’ our allies have shown up for us. Whereas Netanyahu feels like he can lead us around by the nose when ever he needs a strong back and weak mind.
This is not investing or investment advice to you, or anyone. It’s is provided for your entertainment purposes only. And if you are investing, contact a professional before making any decisions. Buying and selling stocks, futures, or any investment is a risky activity and can cause you to lose money, including the principal which you invest.
I wish I was like you/easily amused 