It was just a couple of weeks ago (two to be exact) I wrote that markets hated uncertainty and there was plenty of uncertainty. But many people didn’t seem worried. Ah, what a difference two weeks makes. Those same uncertainties are now becoming a REAL reason to worry. So I thought it might be a good time to update the same worrisome issues that were dismissed as “yeah, so what” two weeks ago.
By the way, should you not want to worry, listening to Portugal The Man’s (rock group) new release “What, Me Worry?” may be just the thing you need (see below). And if that doesn’t do the job, we’ve got another link to Willie Nelson’s song “I’m a Worried Man” for you at the bottom of this piece. But I digress…….
So just what were those 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 lock down 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.
UPDATE: China is experiencing a huge spike in Covid-19 and now not only is Shanghai experiencing mass mandatory lock downs but other major cites are as well.
- 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.
UPDATE: Well there are riots and demonstrations around the globe protesting the pain of high inflation. Food shortages are becoming a stark reality (and getting worse), Walmart truck drivers now are paid $110,000 (just to start) making wage inflation a sure thing. Inflation has not peaked yet either.
- 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.
UPDATE: Interest rates are rising fast. Really fast. As I write a thirty year mortgage just hit 5.25%…..up dramatically from 3.25% only a moth or so ago. The 10 year treasury is pushing past 2.8%. Still substantially below the inflation rate. The real estate market is seeing a huge rise in sellers listing their properties. The Fed is starting to sense a bit of real hawkishness within its ranks.
- 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.
UPDATE: More uncertainty. The war looks to be a very prolonged affair. No truce, no negotiated “peace” and no end in sight. The unintended consequences are to numerous to even begin to contemplate.
A REAL TIME TO WORRY!
So a couple weeks ago all the uncertainty was not, apparently, a big deal. Those “calm” investors must have been listening to Portugal The Man’s “What Me Worry” new release. (see below) BUT, now that all those uncertainties have become more relevant in such a short (two weeks) period of time might I suggest an alternative video.
To worry or not to worry. That is the question.