Rotation or Sideways Spiral

We hear a lot of talk lately about the rotation of the markets from growth to value. Is that what is really happening, or is it a confused spiral reaction between hope, frustration, and reality.

August 7th is sitting out there..

August 7th, in my mind, was a pivotal day where macro issues hit an apex. While there has been significant amount of market movement since then, the main bottomline so far is a move out of bonds and gold, and a bouncing around of stocks and commodities with nominal new highs being made. Much of this response is due to the FED effect that on the one hand tries to hold down yields, hold up price, of high risk junk bonds that support bankrupt headed entities, and on the other hand tries to hold down yields that feed consumer and speculative stock market activity.

While this is going on, the new political thrust is directed towards more debt funded infrastructure investment, and yet unless the Democrats win the senate races in Georgia, things will grind to a standstill. On top of that McConnell is going to try to stifle anything the Dem’s come up with, his goal is the same as the Republican plan in 2009, “don’t allow the Democrats to have an Economic Success”. As we have discussed here repeatedly, Conservatives run to the money line, the needs and aspirations of the people are secondary. On top of that state and local funding for the actions of the people is in the red.

Stock Market Hope without Foundation..

So what has all this stock market Hope really got going for it? I would say that the second leg out of the August 7th apex, a down move in stocks is looming.

And note, a couple of things I haven’t mentioned so far in this post..

1. Obviously the National Tragedy, COVID and the death toll.
2. Transition issues of the Trump administration, probably according to inside reports, due to surprise that they lost and all the documents that have to be deleted and or destroyed before other eyes move in.
3. Transition issues for Treasury department records around monetary support recipients.