The Truth About the Stock Market and the Economy

I write this because there is significant ignorance of markets, the economy and what we see on the news.  So much of what we see, particularity on liberal media like CNN and MSNBC is profound ignorance.   People that use those sources to understand economics and the market will always be in the dark.

Here are some truths you need to know:

• The economy is in a boom.  3+% growth in GDP. 
• It is twice as good as the last 15 years since 9-11.
• The Market reflected the optimism for a long time and the run up of 40% since Trump was elected 16 months ago. That run up is all about faith and belief.
• A lot of people got into the market, some who probably shouldn't have.  Last in first out.
• Inflation is greater than is has been since 9-11.  That's actually a good thing.
• Interest rates are now moving up slightly.  How far, they will go yet to be determined.  Trees have tops and so do rates.  The potential for this puts a lid on the stock market for a time.
• International markets reflect the USA.  No matter what you hear about China or Europe, the US Economy is multiple times larger and more influential than any of those markets.  It is not the tail it is the big dog, the other markets are the tail.
• Unemployment is way down, and EMPLOYMENT is way up.
• Jobs are being created.
• Wages are rising.
• Profits are rising.
• Forecasts for growth by some federal reserve forecasters is for 5+ percentage growth in the GNP.  That's a lot of money in people's pockets.  It has to go somewhere.

So with all that good news why did the market go down nearly 10% in the past week?  Today being down 1200 points.

You will find the truth hard to grasp.  Here it is:  THINGS ARE TOO GOOD.

When all the news is good and it is, people tend to think that we are at top.  Rising interest rates always augers against the stock market.  During Carter's 18% interest rate disasters, the Dow hit a LOW of 700 (see the chart above with the blue dot),  Today it's Around 24,000. Down from the high of 26,616. 

Many investors are convinced the market can't go much higher.   They are the nervous nellies.  When the least sign of stumble showed up they started to get out.  The 450 point drop on Friday was more about not finding buyers for stock the nellies wanted to sell so they dumped them at any price and took a bath.  Today the computer models kicked in as sell signals were breached.  Automated selling from trigger points accelerated one another.

The truth is the economy is strong and getting stronger.  Everything points north.  They are calling this a market correction and in a soft way it is.  15% (not 10) is the usual correction zone.  Now is not the time to panic.  Now is the time to wait.  I'm not a buyer .... YET.  But there are going to be opportunities.  It's good to have a correction from time to time. It stabilizes the market.  It may not go nuts north, but it will be steady.  There are NOT fundamentals driving down the market.  It's all emotion, fear and greed.   Although the plunge today on a point basis is the largest in history, as a percentage of the market it isn't even close.  Don't be fooled by the fools who know nothing on TV or Radio.  The Glee expressed by some is just ignorance.

How soon should one look to adding to your position?  It will be a matter of days.  I'm thinking Thursday or Friday.

So take a deep breath and relax.  A correction, even a small one is GOOD for the market.  We want people in the market who understand economics.. not some of what I hear said.