Markets hate uncertainty, right? NO! What could possibly go wrong??!
While sorting through all the news recently (and there’s a lot), it sure seems there is a whole lot of uncertainty being ignored. So maybe everyone spent time (like me) listening to Portugal The Man’s (rock group) new release “What, Me Worry?” (check the link at the bottom of this piece….it’s cool).
After listening it all became really clear; there really is no need to worry. Right?
So just what are these silly, not to worry about, news reports that are making everything so uncertain? Well let’s take a look (in no particular order):
- It appears China is having a fresh new outbreak of COVID-19. Not just in Hong Kong, but now on the mainland. It’s reported China has just ordered 51 million people into lockdown as new cases rise. Obviously supplies of parts and finished production products (think Apple) may be affected along with economic growth in China. How bad could this be? Will the pandemic reappear here in the U.S? Lock downs again? Uncertain.
- You may have read somewhere about there being a spike in inflation. Not the transitory type, the real deal. The real deals, meaning overlooked items, are things like car washes (just had a 20% raise to keep our vehicle clean), delivery charges (or fuel surcharges….which seem to never go away), etc. Obviously gasoline and food get the big headlines but almost everything you use or rely on is increasing. Those things never get rolled back either. Will wages keep up? How will people react to consistent price increases? Uncertain.
- Where will interest rates go? The Fed is scheduled to begin raising interest rates this week BUT in .25% increments(?). Will that be enough to stem the inflation tide? Unless interest rates are actually above the rate of inflation these negative rates will continue to persist. How aggressive will the Fed be (and other global central banks) AND what will be the consequences? Recession? What will happen to the housing market? Just how high will rates go? Again….Uncertain.
- The big headline grabber? War. Russia. Ukraine. The BIGGEST unknown, and the most uncertain. Will it spread? Will it go nuclear? Will China assist Russia? Will Russia default on international debt obligations? Will will will???? The unintended consequences will not come to light for quite some time. Talk about….Uncertainty.
So if markets hate uncertainty why are so many investors so calm and unfazed by all the news and events covered daily (or, hourly)? There can be only one answer. They too have been listening to Portugal The Man’s “What Me Worry” new release. And, that’s why the link is shared here at the end.
Tune in and get calm.