Is the party over? Yes.
Now, moving on. With the last few days of financial markets experiencing significant selling, the very first thing to expect is everyone (financial “experts,” politicians, golf buddies, etc.) pointing fingers of who is to blame. Then, in order to comfort each other, agreeing that “nobody could see this coming.” Total surprise. “Wow, who could know?” Yup, expect it. Human behavior at its best.
Unfortunately (or fortunately if you have been short) everything that is causing the financial decline has been right in front of everyone………but ignored. Hopes and predictions of an interest rate cut by the Fed overshadowed existing and huge potential problems. Oh sure, there is a lot of blame to go around, but any time the government (including the Fed) attempts to financial engineer economies, it does not end well. FOMO (fear of missing out) and good old fashioned greed take over investors’ decisions. Until it turns.
However, there may be an additional culprit to throw some blame at this time around; the media and politics. With an election coming up, and a very divided electorate, “massaging” news and “skewing the presentation” may have influenced investors. Or, in other words, as P.T. Barnum once said, “The common man, no matter how sharp and tough, actually enjoys having the wool pulled over his eyes, and makes it easier for the puller.”
It’s pretty common for any current ‘sitting’ political administration to portray events, that may have an impact on voters, in the best possible light. This has been taken to extreme with today’s politically charged environment and the use of social media. Negative things that influence the economy are often under-reported, not reported at all or, even worse, misreported. Hence, when negative news becomes too big to ignore, markets react.
One glaring example is the labor market. Last Friday’s government release of a disappointing NFP (non farm payrolls) number “shocked” investors and led to “fresh” talk of a recession. Overlooked, and under-reported, is the fact that for the past year or so, that monthly employment number has been consistently overstated with later revisions reflecting a much lower number. Often times significant reductions. The headline numbers paint a rosy picture until reality hits.
Well the “jig is up.” Investors (and people in general) are waking up and realizing they have been duped. It’s common knowledge that investors could never trust economic numbers from China but the U.S. numbers were solid, right? Uh, NO. Inflation is under control, right? Uh, NO again. WTF! The media and TikTok said all was good and bad things were a figment of your imagination. Again, the “jig is up.” P.T. Barnum was right; “You can fool most of the people most of the time.”
Have investors caught on? The bubble has burst.
Bill Taylor is the CEO of Digital Wealth News™ and AI & Finance™ and a 40+ year veteran of the financial markets. You can also ready his weekly musings on BTC, ETH, Gold & S&P500 at The Taylor Market Report.
