Don't be too negative. That's the lesson of this week and in many ways, it's been the lesson since the beginning of this bull market back in March of 2009. You don't want to be too negative because if you are most likely going to miss out on some remarkable gains because more often than not things actually work out for the better.
Rewind the tape. We came in this week with an attitude that inflation was everywhere, that it was not stoppable and that it would be the grim reaper for everything. Lumber, semiconductors, copper, iron ore, all going inexorably higher, soon to impact every aspect of our lives.
We were operating on the assumption that Fed Chief Jay Powell was acting foolishly in his attempts to keep rates low so more people could get jobs and that his intransigence on how the inflation was is just temporary was either ignorance or a deliberate whistling past the graveyard.
We had gotten gripped by a bond market that was hellbent to wreck the economy in its relentless rout of Treasury holders, the economy be damned higher rates are here.
We closed the door on the stay at home economy stocks but had trouble prying the opening of America narrative because we were too worried about the "impending doom" that might come from the variants if people didn't get vaccinated, yes, the ill-adviser word choices of the head of the CDC rang in our ears every time we want to go do something. What was the point of getting vaccinated after all.
And, to make matters incredibly worse, some outfit we have never heard of, Colonial Pipeline, turned out to control our gasoline in the East, went off line because it wouldn't pay $5 million in cryptocurrency to some apparently Russian bad guys. Hoarding, gouging, higher oil prices, the works.
Then we get the coup de grace, a consumer price index number that showed an inflation genie that's out of the bottle, yep, it was already too late to do anything.
But in the last half of the week almost the entire negative scenario unraveled. Lumber, the leading inflation culprit, had a classic blow off top. Copper and iron followed. Then the grains rolled over. Then we learned that notebooks had slowed year over year and that caused some semiconductor parts to plummet. Oh, and Colonial paid the ransom and oil collapsed.
In the meantime the flood of IPOs which had been waterboarding the market dried to a trickle as deals got cancelled rather than be thrown in to the conflagration. We had no new supply to weigh us down.
Then totally out of left field we had a couple of the most downtrodden stocks of newly minted big cap tech companies, DoorDash (DASH) and Airbnb (ABNB) , report noteworthy quarters that drew upgrades not price target cuts.
Finally, we had the gloom and doomster in Chief, Director Walensky suddenly told we, the vaccinated, to shed our masks both in and out and let the games begin.
The results? One of the most amazing two day rallies that I can recall, two days that you would have missed if you thought that inflation was going to flatten everything in its path and we would be overwhelmed with new merchandise that no one wanted.
It's a lesson. The reason I subscribe so often to staying the course is that if you had missed these last two days you may have missed 48 hours of the most important gains of the year. The darkest moments are indeed often right before the dawn. And this dark-dawn transition may be one of the quickest fait de complies I have seen in a very long time.
