We've got two groups of investors in this market right now: those who think that perception matters and those that think that reality matters. There are times, like this week, when they clash.
I like reading Twitter to get what people have to say about what I am writing and talking about and it is incredible to watch people attack me for being bullish last week and then being bearish this week, as if that's really the case about how I feel.
Now, I could easily just block people who don't understand, and if they are abusive I always do.
Instead, though, I just watched the dichotomy unfold. The premise of my view right now is that the economy is strong enough that it can handle not just one but two or even perhaps three rate hikes this year.
The premise is based on what happens when I speak with executives, whether they be United Technologies (UTX) CEO Greg Hayes talking about a sudden surge in orders at Carrier and Otis or Bill Sandbrook, CEO of US Concrete (USCR) , talking about all of the myriad projects he's got going in Dallas, New York City and San Francisco, or Martin Marietta (MLM) , which has a great read on how Georgia, Florida, North Carolina, South Carolina, Texas and North Carolina are humming.
They see strength unrelated yet to anything that President Trump has proposed. That's because nothing's gone through Congress so, obviously, nothing's been done, other than some deregulation.
When, and I think it is when, not if, Trump gets his way on lower taxes, then there will be a further bump up in the economy. I think that's obvious, too.
Against those, a half point or even three-quarter point rise in rates will be just fine. It won't help, but I don't think it will hurt that much.
That's the reality.
The perception? The perception comes from my years of investing. I know that when rate hike cycles -- which is what we are now in -- really get going, people fear they will have a momentum all of themselves, as the tightening cycle did in the 2000s when the Fed raised rates 17 straight times, which led to the Great Recession.
Those people will be heard from on Wednesday and Thursday. That's what happens. News anchors will ask commentators whether that could happen again. They will say not likely. Then the commentators will press, and someone will say, sure that could happen, and that will embolden others to ask and others to answer, and back and forth and back and forth.
Next thing you know, you have the perception trumping the reality.
That's what I am concerned about. That's what we have to get through if we want the market to advance further, and by pointing it out I am simply trying to prep people to the news cycle.
It's difficult for most who have not been at this a long time to understand that perception can overrun reality.
This is one of those weeks when it can happen.
Does that make me bullish last week and bearish this week?
In my old days, I would simply say, "don't be an idiot." I am now saying I am simply trying to express the different strains of thought that coalesce to form stock prices. I want people to know them, so they can be better at their own investing.
And to do that I am willing to tolerate uninformed belligerent comments on occasion in my Twitter feed. It's a small cost to learn how best to teach and what to teach at some of the more difficult fulcrum moments in the stock market.
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Wall Street Goes to Washington. In the first of a series of conversations with President Trump's economic advisers, acclaimed author and columnist Michael Wolff will sit down with Trump insider Anthony Scaramucci, co-founder of private-equity firm Skybridge Capital. They'll discuss the Trump administration, Scaramucci's thoughts on the policies and regulations under debate and his outlook for the next four years. Join us for this cocktail party on Monday, March 27, at The Metropolitan Club in New York. The event is free, but seating is limited and reservations are required. For more information or to RSVP, email firstname.lastname@example.org.