Financial Markets, The Election and Termites

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January 2024 is settling down…

New Year’s hangovers have passed (unless you’re into dry January – then you never had a hangover), Michigan is the college football champ and the NFL is down to just four teams. The SEC finally approved several spot bitcoin ETFs and bitcoin celebrated by dropping almost 10%. Stocks resumed their climb to Mars with investor’s eyes locked on another 25% rise this year.

Ah, but it’s a long year……….and an election year as well.

Of course the number one thing on investors’/traders’ minds are just how high the stock market will go in 2024. I’m sure you have heard that there is over $8 trillion (TRILLION) dollars just sitting and waiting to jump into the stock market. Out of bonds and short term CD’s and into equities. Those same investors are ‘lock sure’ the Fed will cut interest rates 6 times this year. No matter that the Fed says MAYBE there will be 3 cuts.

With the markets performance the past few years, who can blame them from being bullish? It kind of compares (at least in my mind) to building a house. The plan begins as a single story home but as more money flows, the plan changes to three or four stories with gold plated facets, multiple bedrooms (even if one never has visitors) and on and on. Bigger is better, ya know.

One (only one?) of the BIG things this year is the election. Kind of like the gorilla (or elephant or giraffe) in the room. What the h*** will go on? Could the financial markets be politicized?  It’s possible the Fed may feel political pressure to cut rates and stimulate growth BUT at the risk of higher inflation. It also could be that the government will attempt to make sure the stock market does not experience a steep sell off (gasp, but yes, it has happened). You can be absolutely certain that as the election gets closer, the amount of ‘misinformation’ or ‘disinformation’ will be extremely prevalent. Who or what should you believe? Personally I strongly listen to our cat……he is true.

Mishka | Market Specialist

In the meantime, a whole lot of very VERY important market-moving events have been overlooked or dismissed. Until it’s not. The new year brings an expanding war, other new potential ‘hot spots’, economic uncertainty, a potential migrant ‘revolt,’ market politicization (manipulation), a debt ‘crisis’ and an election.

It has always been said markets hate uncertainty. Why doesn’t it now? I know, if these ‘events’ are so bad, why is the market hitting new highs? Good question. Blinders. That’s my answer.

Just like the aforementioned house. You decide to completely remodel that super cute one story house you have fallen in love with. Perfect location. With the market hitting new highs and money flowing in, you decide to make it even better by making it bigger. With gold plated everything. A sauna….oh heck, a swimming pool, too. Perfect. But with finally locating and falling in love with your dream house, you kind of skipped and dismissed an inspection. OMG. TERMITES. How could you have overlooked……..TERMITES. The dream house sadly collapses. Who could possibly know?

Moral of the story?  Don’t overlook those ‘termites’ in this market.