Market Update 1/11/22

The market miraculously recovered from yesterday’s morning dive and all indexes are seemingly confused about the near future trajectory. This is the reality at any given moment in the market so investors shouldn’t be discouraged. Jamie Dimon, JP Morgan’s CEO yesterday said that he believes the consumer will be in the best shape for some time (after about 6-9 months) and that the economy is poised for a 3 to 4x gain this year! Mr. Dimon is very well respected and what he says is listened to by many people with big bank accounts. I presume that some of his comments might have helped yesterday’s relief rally along.

If Dimon is right or wrong is of course up for debate, but I would argue that if he says anything it is likely backed up by some information the mere mortal might not be privy to, and I don’t mean shady back door deals, but cold, hard, statistical analysis. I don’t put all my trust in Dimon’s words, but many people do, with a lot more at stake.

Today, Jerome Powell, our trusty Fed Chair is appearing on Capitol Hill as part of his re-appointment process. If Powell remains Fed Chair, we are in reasonably good hands. Powell cleverly and boldly navigated the risks of our “synthetic recession” and probably kept us from getting into real deep trouble. Another thing on investors' mind’s today is the proposed rate hikes we will be facing this year, likely 3 or 4. This action has long been overdue and was only postponed because of the Hardship the pandemic caused. This delay will not help us because everything we should have done last year (or the year before) will now have to be done in a much shorter timeframe, this means that if 3 to 4 rate hikes are possible, we will get 4 or more this year.

With rate hikes and uncertainty on the horizon, I will not be surprised to see a wary investor, but yesterday’s end-of-day trading activity proved otherwise. Investors don’t want to give up our record run and that is good if the fundamentals of the companies, consumer strength, and the economy are in good shape. According to Dimon, it is, which is why we saw a dubious rally at the end of the day that seemingly went against the sentiment investors had in the morning. I guess they changed their minds. Or their fears were lessened by an insightful and knowledgeable CEO. Whatever the cause, we should be aware that there is a certain discipline in the sentiment that makes investors cautious, but on the other hand, there is also an enthusiasm to reach even higher levels that seemingly only requires a nudge.

Where does this leave the average “from home” investor? Rate hikes are a guarantee, this alone makes it worth keeping an eye on the bank stocks, all of them really. The market has been on a tear, but it is important to look at all the components of the market separately because they do not always move in unison.

Thanks for reading,

The Punkrock Capitalist