Laugh… Cry… Profit Your Way to “Normal”

“So, ‘Count’ and ‘Recount’ are sitting at a bar in Florida…”

By now, of course, that joke really needs no punch line.

Ballots in the Sunshine State – and neighboring Georgia, too – are still being counted… and re-counted.

As if more of that kind of uncertainty weren’t enough, equity markets took a steep plunge Monday. The Dow Jones Industrial Average was down as much as 619 points and finished the day more than 2% lower than it started.

What’s so unusual is that markets are typically quiet when the Treasury market is closed and currencies don’t trade, as was the case in observance of Veterans Day.

And it was just the beginning…

It’s now been four straight losing sessions in a row for stocks heading into Thursday, November 15, 2018.

And recent data continue to bolster the Federal Reserve’s “normalization” plan. So, things are actually getting a little more serious.

The Federal Open Market Committee (FOMC) met last week for what was widely understood to be a “dead” meeting.

As expected, the FOMC kept the federal funds rate unchanged at 2% to 2.25%.

The central bank’s policy-making arm also signaled it will continue on its path of gradual rate increases.

Its post-meeting statement did change, as members noted that business capital investment “moderated from its rapid pace earlier in the year.” Consumer spending, meanwhile, “has continued to grow strongly.”

There was no mention of recent market volatility.

Fortunately for us, there’s enough uncertainty out there – even if Florida gets its counts together – to create the kind of volatility we can profit from…

The Fed Kills

Wednesday morning’s release of the Consumer Price Index (CPI) for October provided more evidence for the Fed’s case.

The headline number was up 0.3% month over month, accelerating from 0.1% in September. That’s in line with expectations, but it’s also the biggest move in nine months.

The CPI was up 2.5% on a year over year basis in October, accelerating from a 2.3% rise in September.

“Core” CPI – which takes out volatile food and energy prices – was up 0.2% on the month, in line with the consensus forecast.

On a year over year basis, “core” CPI actually decelerated from 2.2% to 2.1%.

After a “green” open, stocks sold off all the way into Wednesday’s close.

Midterm elections are – for the most part – behind us. So, we can rest a little easier with no political ads lighting up literally all our screens. Thankfully! Rodney’s relieved as well, as he’s mentioned last week when he emailed you about pot.

Equities rallied hard last Wednesday in the aftermath of midterm elections that turned out largely as expected. But stocks turned ugly again late last week.

And that trend has continued this week.

It looks like the market’s starting to reflect the reality of what lies ahead…

Stick with us, though. We haven’t even gotten out of the “accommodative” phase.