How much of the gains since President Trump took office do we have to repeal before we get to levels where it isn't worth selling anymore? Have we gotten even near where stocks should be bought simply because they are so cheap that they are worth socking away?
Those are the operative questions people are asking when they are not cursing the market for ripping their lungs out for still one more day, like today, where the averages have just been crushed.
Now I know that we are at a peculiar junction. There are landmines all over the firmament. We know that the Fed Chief has already committed us to a rate hike this next week and he hasn't backed off, formally, the idea that we need to overshoot hikes, even if it means more than three next year, in order to slowdown the economy. The market's been heavy ever since he lit it up with the gibberish two months ago. As bizarre as it might seem I could make a case for raising or lowering rates.
You would lower rates when you start seeing all of the deflationary aspects of the economy and you witness that we are about to get an inverted yield curve which has typically meant recession. An inverted yield curve is where short-term notes can yield more than long-term bonds because the Fed has jacked up the short term money higher than long term money. It's a real bad sign for the economy even as it doesn't necessarily mean the economy will roll over.
It's a tough call to ever want to cut though when you have such strong job growth, wage increases and a robust industrial utilization number as we have been getting.
That's why the smartest thing Powell could do is to wait another month or two to see which side wins, especially when we know that there will be tens of thousands of layoffs in retail alone one month from now.
But he committed to it and he can't back down now without looking toothless.
That's the state of play as we head into next week's action.