@MWhalekiller MW - Have you considered the massive disconnect between individual stocks and sp500? So many of the high beta mid cap stocks that have led the rally, are already down 60+%. I feel either these have close to bottomed or the sp500 won't fall as much.
The biggest lie on Wall Street right now is:
“Markets are forward-looking.”
Bullshit.
Markets are “forward-looking” when that explanation fits the pump.
Good economic data?
Stocks pump because the economy is strong.
Bad economic data?
Stocks pump because the Fed might become dovish.
Inflation falls?
Stocks pump because rates can come down.
Inflation rises?
Tiny dump. Shorts enter. Shorts get destroyed. Stocks pump again.
Amazing how every road somehow leads to the same destination:
HIGHER.
Now look at what’s actually happening.
Energy costs are exploding.
Diesel prices are at extreme levels.
Consumers are drowning in debt.
Housing and financing remain expensive.
And inflationary pressure is building again.
And don’t tell me:
“The market doesn’t care about today. It prices tomorrow.”
Because THAT makes even less sense.
We already know what expensive energy does tomorrow.
Energy ↑
Transportation ↑
Production costs ↑
Consumer prices ↑
Inflation ↑
Purchasing power ↓
Pressure on margins ↑
Rates stay higher
That’s the FUTURE.
So where is the famous “forward-looking market” now?
Exactly.
My thesis is that people are looking at this completely wrong.
The stock market stopped being a reflection of the real economy a long time ago.
The people getting destroyed by higher food prices, energy bills, mortgages and debt aren’t the people controlling most financial assets.
The wealthy own the assets.
And when assets rise…
THEY GET WEALTHIER.
Think about that incentive.
A billionaire doesn’t sell NVIDIA because diesel became expensive.
A giant fund doesn’t need to liquidate Microsoft because groceries cost 15% more.
The middle class feels inflation through its expenses.
The wealthy experience inflation through their ASSETS.
And then we’ve built a financial machine that keeps feeding money back into those same assets.
Passive investing.
Retirement money.
Institutional flows.
Corporate buybacks.
Index funds.
The biggest companies rise.
Their index weighting becomes larger.
More passive money gets allocated to them.
They rise again.
And everyone looks at the S&P 500 making another ATH and concludes:
“The economy must be fine.”
NO.
The economy can become worse while the asset economy becomes richer.
That’s exactly the point.
The average person can lose purchasing power while someone holding millions in financial assets becomes millions richer.
At the same time.
This isn’t capitalism failing.
This is the financial system doing exactly what it was built to do:
CAPITAL COMPOUNDS CAPITAL.
And the people who already own the most capital benefit the most.
That’s why I don’t automatically interpret an S&P 500 ATH as economic strength anymore.
It may actually be evidence of something completely different:
A historic disconnect between asset owners and everyone else.
The rich own the assets.
The middle class pays the bills.
And Wall Street keeps telling you:
“Markets are forward-looking.”
Maybe.
Or maybe we’ve created a market where almost every narrative eventually becomes an excuse to keep asset prices moving higher.
Watch the reaction to BAD news.
That’s where the truth is.
#MWhalekiller