For the second month this year, the only investment decision I made was…to make no decisions. I decided to stand pat.
My thought process around it was that I think we’re in a very weird, no-man, no-woman’s land situation in the market. For the most part since December, the markets have been pointing straight up and were setting records again, despite constant evidence showing that economic growth, pretty much everywhere has been slowing. Then layering on top of this is all the trade trash-talking which got ratcheted up another notch in May when the Mad King doubled down on China and threatened to go scorched earth on them with tarrifs on everything and then pointing to Europe and trash talking them up also.
If I’m a business right now, I’m thinking how do I make any investment decisions on how I want to allocate my scarce capital when I have a guy who’s kicking sand up everywhere and gumming up commerce? I don’t there’s any incentive to deploy capital for a business and for me there’s no incentive to put new money to work. I feel inclined to stand back and wait for the dust to settle….if it ever will.
Up front both parties are putting up a stiff upper-lip, punching their chest and saying they will weather all this. Meanwhile people….like real people are stuck. Business is stuck. Commerce is stuck.
The market has been partying it up since the Federal Reserve signalled in December that it would be patient with future interest rate hikes. Then it pulled the breaks in April. I’m thinking when are the parachutes going to get deployed and when do we assume the crash position? Even the bond market is getting into the act and taking longer-term rates lower and flattening the yield curve. The shouts from the bond pit are cries to not just pause, but to take rates back down.
Is winter coming for stocks? It has made me take a pause.