No matter what the market does, writers try to explain it, nearly always incorrectly.

Inflation Scare?!

The Dow is down about 550 points as of 1:30 PM central. The S&P 500 is down about 45 points. 


Reuters: Wall Street slips as inflation jitters spark broad sell-off
Reuters: Inflation fears push S&P 500 to one-month low
Wall Street Journal: Stocks Extend Fall, Dow Drops More Than 500 Points, Streetwise: If Inflation Is Coming, Here’s What to Do About It
US Treasury Yields

If there was an inflation scare, yields would be soaring, or at least should be soaring.

Yields generally peaked mid-March.


The Nasdaq peaked mid-April. 

Today's Reaction

So what spooked the market today?

Who knows? I don't and no one else does either, 

There might not be a reason or someone might figure it out months from now. 

One day or even a few weeks might be random noise.

Valuation Scare

Absurd valuations in and of themselves are a valid reason for a selloff. 

If stocks do turn seriously down here, most likely it will be a valuation scare, not an inflation scare that does the trick.

Majority View

Rear View Mirror

A few of us believe inflation is mostly in the rear view  mirror. 

Let's discuss Bob Farrell’s classic market rule: "When all the experts and forecasts agree, something else is going to happen."

Who Else Is in the Transitory Camp?

There are not many of us, but Lacy Hunt at Hoisington Management is in the small group.

In that post I quoted Lacy Hunt at Hoisington Management as follows.

"Contrary to the conventional wisdom, disinflation is more likely than accelerating inflation. Since prices deflated in the second quarter of 2020, the annual inflation rate will move transitorily higher. Once these base effects are exhausted, cyclical, structural, and monetary considerations suggest that the inflation rate will moderate lower by year end and will undershoot the Fed Reserve’s target of 2%. The inflationary psychosis that has gripped the bond market will fade away in the face of such persistent disinflation."

With bond yields barely moving having peaked mid-March, writers are making up headlines to match what they believe.

For today's selloff, either no reason at all or valuations better fit the story.

This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.

Feed news

Latest Forex Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD holds above 1.21 as tensions mount ahead of the Fed

EUR/USD is trading above 1.21, in limited, typical, pre-Federal Reserve trading. Markets await the bank's dot plot and Chair Powell's comments on potential tapering of the Fed's bond-buying scheme. 


GBP/USD hovers around 1.41 after strong UK CPI

GBP/USD is trading around 1.41, rising after the UK reported an annual inflation rate of 2.1% in May, beating estimates and raising the chances of a BOE rate hike. The focus remains on the Federal Reserve's decision later in the day.


Gold: Bulls attempting last dance ahead of Jerome Powell?

Gold price fell for the third day in a row on Tuesday and tested the $1850 psychological support before recovering slightly to near the $1860 region.  Fed decision, Jerome Powell’s policy outlook to determine gold’s next direction.

Gold News

Shiba Inu ready to reverse to $0.0000050

SHIB price faces stiff resistance ahead. Shiba Inu has had a difficult time recovering, suggesting that it may soon face rejection. In the following video, FXStreet's analysts evaluate where SHIB price could be heading next as Shiba Inu gets weaker.

Read more

Federal Reserve Preview: First up, then down? Playbook for trading the Fed

To taper or not to taper? That is the question for markets ahead of the Federal Reserve's all-important June meeting. Fed Chair Powell will likely shoot down any talk of tapering the bank's bond buys. Highly volatile trading could see the greenback first drop.

Read more