Suddenly...Goldilocks is back!!!!!!
First, this has got to be the longest three-day week I've ever had. The Holiday break never really arrived for investors, who can't be blamed for feeling exhausted from the head-spinning stock market volatility over the last month. As the expression goes; no rest for the weary.
You may find it hard to believe, but over the last year, the
S&P 500 is only down by a little over 7%. I mention that because a longer term perspective makes recent volatility a lot easier to deal with.
Second, something changed in stock market land today. We got a monster upside employment report this morning. This had a lot of market watchers afraid that it was strong enough for the FED to stick to its "autopilot" setting of letting securities run off its massive balance sheet and raise the short term interest rates that it controls. Countering that was the Chairman of the Federal Reserve, Jerome Powell who said "we will be patient as we watch to see how the economy evolves".
That is exactly the one-two combination investors needed to regain some confidence, if not get back to all-out bullishness again; a strong economy and a patient FED. In Wall Street parlance, we call that combo "Goldilocks"; an economy not to cold, not to hot, but just right. Add to that low interest rates, low energy prices, and many stocks with low valuations, you've got yourself a rally that should have some staying power.
We still have major trade issues with China, but a dovish FED does remove a lot of worry about that.
Today was a good and rare day indeed for investors and a reminder of the reasons why "all or nothing" investment strategies only work for investors with just two kinds of risk tolerance; super high risk and no risk.
It's why Presidential tweets, talk of impeachment, and weak iPhone sales in China should not influence your investing career - for professionals and retail investors alike. Not to say that the macro-economy, the economic environment at large, doesn't matter. I just mean to say that we are dealing with a record amount of background noise that will only increase as time goes on.
Today, we have regained the FED "put" - when the Federal Reserve is cognizant of how markets, economic statistics, and corporate news ALL interact to influence the economy - and we could expect the FED to sooth investors' worries.
