Stocks appear to have stabilized after a rough week. But several questions remain. Was this a one-time shock event, or is it a correction? And if it’s a correction, how low can things go?
We can be sure that what has happened so far is not an isolated event, but part of a major change in the regime from loose, cheap money to a more normal economy. Corporate profits are high, and America is taking care of business, so there’s no apparent reason to be terribly afraid.
Yet the change is significant, and precisely how significant will not be clear for some time. Here is what to watch for as stocks and other markets absorb the change and make a transition into a new economy.
It’s been one week since Barataria made the prediction that if good news came in on jobs the stock market would tank. The good news came in, with the headline unemployment number slipping below 6% for the first time since 2008. Immediately, the market proved Barataria to be wrong. Then right. Then wrong. Then right, again.
It’s been a roller-coaster of a week. How does that stack up with any prediction at all?
It’s probably time to make another prediction. Let’s stick with the first one, that the stock market is due for a decent but not horrific “correction” that re-affirms that we’re really still in a secular bear market. But with the focus on Fed action we are also entering a time when the logic of the market finally turns rightside up – and good news will once again become unalloyed good news.
We just have to get through the ride before we know what’s up – literally up.