When the stock market headlines the political blogs . . .
When the stock market headlines the political blogs . . .
Here is a graph I saw on Digby’s blog this morning:
There was also a highly-recommended, heavily-commented piece at Daily Kos.
Here’s a pro tip: when you see a daily stock market move leading the political blogs, it’s a sign of a bottom, not a top.
That’s because it’s a sign of emotion, and it means that amateurs are paying close attention. By the time that happens, the big move is over, or at least almost over.
Even with the big drop yesterday, the S&P 500 isn’t down -10% from its recent high last month. That’s not even a “correction,” which typically happen at least once a year. We’ve had as big or bigger moves downward a number of times during this bull market, including a -20% down move in 2011.
Could the market move still lower? Of course! In fact, a “re-test” of yesterday’s low is likely. But in terms of this signaling a recession in the next 3-6 months? No way. The long leading indicators haven’t turned decisively south yet, let alone other reliable short leading indicators like the ISM manufacturing surveys:
or even more reliable and less noisy, initial jobless claims:
These are well within their five year declining track, and show absolutely zero sign of stress. If they started showing up at 225,000 or higher for a few weeks, or went negative YoY, I’d start paying more attention. This morning’s report was 215,000.
Yawn.
Funny, I seem to remember discussions about the stock market being all over the political blogs in the summer of 2008, months before the real crap storm hit. Glad to see Daily Kos has now taken a break from wishing West Virginia coal miners dead of black lung disease, but their angle is merely their hope the downturn hurts the Republicans in the election, not because they have any real insight into the economy other than their utter disdain for working people without college degrees.
Even a broken clock is right twice a day. There is a perfect storm brewing in more than just the climate, and when it breaks liberals like Bill Maher and the dopes at the Daily Kos are going to be sorry they ever wished for it.
@Karl,
What’s your track record in prophecy?
I don’t believe the market is headed down because of fundamental weakness in the economy. I believe that the market is headed down, in general for a time, because as rates rise there is now some competition for where people put their money. Particularly more risk averse people. How large is this affect? I don’t know. But for years now there has been no alternative to putting money in the market for those requiring a modest return on savings. As this changes this channel of funds will dry up.