Ok June 1, the Dow Jones industrial average sits at 18,010.68 at the open. The index is up 1.05% for the year. S&P 500 is at 2,107.39 up 2.4% for the year and the Nasdaq is 5,070.03 up a full 7.1% for the year.
I’m no stock picker, but these levels can’t be sustained given the economic data we received on Friday last. Equities are stuck by two gigantic forces.
The Fed wants to raise rates, but can’t and the economy is moving toward recession.
These two positions are opposing forces, which means no directionality for stocks to take cues.
Given this proposition a churn towards the buy side seems to be order of the day between now and July 4th, but I believe we will see much lower index levels by Labor Day.
The main catalyst for the move lower is the US consumer. Wall Street will finally get the message that the middle class is hurting and no prescription from the Fed can reduce that pain.
These people did not benefit from the Fed’s stock bubble creation, the did not cash in on the bond run up and the certain can’t afford to have a meaningful impact on cratering retail sales.
The Fed, whether the wanted to or not (I’ll leave that for the historians writing the next draft of this saga) created this have and have not society with its easy-money policy and someone had to pay.
Alas it is us.
June 1 and Greek (economic) tragedy is still making no-decision headlines.
This slow-motion train wreck is poised to take a turn to nowhere again as both Trioka and Greek officials fail to do anything constructive.
The EU wants Greece out, but first wants to extract as much monetary pain to combat moral hazard, while Greek officials want out, but do not want to be left without a bogie man (EU) to blame.
Posturing and can-kicking are still the order of the day for this drama. No decision will come this week.