“Davidson” submits:
In the face of extreme pessimism from the coronavirus, Real Personal Income posts a new high 2wks after revised Real Retail Sales did the same in the Jan 2020 report. These indicators have a history of rolling-over well in advance of identified market tops due to recessions. No signs are present that recessionary fears since Fall 2018 are justified. The coronavirus has raised similar fears as these key economic measures continue rise in trends since 2009.
Even with the current economic strength, the Fed is likely to cut Fed Funds 0.25%. As observed earlier, the Fed follows-it does not lead. What the Fed follows is the T-Bill rate which recently fell to 1.25% and sits well below current Fed Funds rate mid-range of 1.62%. History provides multiple examples since 1953 of the Fed adjusting Fed Funds relative to trending T-Bill rates which have been set by market forces.
The past 2wks has witnessed increasing calls for the Fed and even President Trump to do “something” or anything to stop the slide in the market as if the market describes economic conditions. It does not! The market prices are based on investor perceptions after economic reports are well known. Investors for hundreds of years have set market prices on expectations not on the factual information at hand. Market pricing which deviates from economic trends provide investment opportunities.
The current correction is a fear that things could “go wrong” while they are “not going wrong”. Today’s market provides many investment opportunities.
