C’est la vie. Another dip in the stock market has been followed by another violent “V” bottom. One minute the S&P 500 is down 5 percent on fears of, well, just about anything and everything, and the next, the market is back to flirting with all-time highs. That’s just the way the game has been played in 2014 as anyone looking to reduce their exposure during a potential crisis has been made to look pretty silly within a couple days.
As has been the case for some time now, the most recent dip in the market was accompanied by what appeared to be the makings of a potential crisis. While just about everyone in the game was fooled by the credit crisis of 2008, no one wants to get fooled when the next portfolio-crushing crisis occurs. As such, traders are constantly talking about the next bubble, the next crisis, and the next big problem.
However, as has also been the case for some time now, once a central banker starts talking nice in front of a microphone, traders fall all over themselves to get back into the liquidity trade.
S&P 500 – Daily
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This time around, we have the oil crash – which is ongoing, by the way. While stocks were enjoying an impressive joyride to the upside over the past two days, crude was continuing to move down and closed at a fresh low yesterday.
As you will recall, the global macro crowd has been telling us that the massive decline in oil prices was supposed to usher in a deflationary environment, which would be a very bad thing for Europe, China and Japan.
We have also been told that the oil crisis has created instability in the emerging markets. More specifically, Russia has been punished unmercifully – both in terms of its currency and its stock market. And as the thinking goes, the problems in Russia could easily spill over into the rest of the emerging markets – ala 1998.
David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.