So, the Fed raises rates but the bank stocks sell off because Janet Yellen doesn't say the economy is red-hot, so if I were Jay Powell I would raise rates four times next year? It literally is that stupid.
Of course, they all go down together. Of course, they all seem like they are wounded tigers waiting to be put out of their misery, ready to spring and eat you, because you are the easiest prey to catch when they are hurt.
So now you think, darn, we didn't get something fabulously scary about multiple rate hikes, so the owners and the renters of these stocks will dump them. And why not, they are probably going to have shortfalls anyway, because there's not enough lending going on to make up for the difference in trading revenues.
And you wonder why you haven't bought a bank stock since the September bottom, when we realized that tax reform would be a reality and these stocks benefit.
That's been the pattern so often in this market. It's some sort of weird unrequited love for stocks that then causes a jilt to kick in, and the romance is over.
Think about it. 3M (MMM) holds an analyst meeting and Inge Thulin does not "substantially raise" his forecast, so some sell the news while others therefore see the stock go down and think that the headlines were disappointing. But anyone who caught the actual substance of the day knows things are going very well. It's going to turn out to be your chance to buy.
Home Depot (HD) invites everyone in and talks to them and tells them that things are really much, much better in the country, and that business is strong on all lines, just as they had said when they reported. It wasn't enough. So the stock goes down almost five bucks instantly in pre-opening trading, and is heavy all day.
That was your chance, for certain.
How come it is so hard? Let's go back to the banks. Right now, people are trying to figure out what can happen now, what catalyst is there between now and when they report, other than a negative one, that the estimates are too high because there is not enough lending or trading.
They look at it like, "OK, they are done."
That's another refrain you hear all of the time. "OK, the cyclicals are done." Or, "that's it for the retailers." Or, "the rails have had their move."
And then you look a few weeks later, and you say, how in heck did Gap (GPS) get up there? Have you seen VF Corp. (VFC) ? Or Canada Goose (GOOS) ? You mean Caterpillar (CAT) broke through to the $140s? What is Norfolk Southern (NSC) doing at $145? Wasn't it just at $120 where it was really expensive? Did Nike (NKE) really continue to rally after Footlocker (FL) said things are now better?
It's almost as if the stocks are playing leapfrog over your ability to perceive where they could go; as if you are frozen by the fact that JP Morgan (JPM) is no longer in the $90s or that Wells Fargo (WFC) , after all the scandals is now in the high $50s and even touched $60. Who knows how much you will hate Bank of America (BAC) at $30.
Of course, there are real concerns. If we don't get any inflection at the long end of the yield curve, banks won't lend as much, because it's not worth the risk of a recession. Trading revenue isn't good, as they acknowledge.
But there were risks with all of those other stocks, too. And guess what? They moved higher.
So remember that, if you see weakness. The weakness has been a clarion call to sell for so many, when it is really the buying opportunity for so few, who are able to see that stocks are breaking out of old rangers and aren't being contained by what you thought would contain them.