Market On Open - Wednesday 3 April

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Low Cost, Pro Grade Work - What’s Not To Like?

by Alex King

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Powell On Deck

Chairman Powell speaks today at midday Eastern. We can expect to see markets react in the way they do to FOMC events, which is to say to swing thisaway and thenthataway, causing the most damage to anyone with proximate stop orders, before setting off in the direction bigs had intended in the first place. The market’s digestion of Powell’s speech won’t be known at the close today; rather I would look to tomorrow and beyond to see how his messaging is received. There is an emerging consensus that (1) inflation is not tamed but (2) the Fed isn’t going to hike either. And by now most market participants seem to have worked out that inflation is only bad for … who is it again? Oh yes - poor people who have to go to work and buy food and gas and things like that from something called a …. what was it again … paycheck that’s right. Paycheck. Whereas if you are a market big and you don’t really get paid in the conventional sense; you might break off a piece of cheese from the big rolling snowball of cheddar you have had going for you for some decades now, you know, just a crumb to buy a house in Aspen or maybe an apartment in Paris, a trinket kind of thing? Inflation? Man, inflation is great. Prices up means revenue up means margins up means earnings up. And as long as the pesky Fed doesn’t start trying to put up the price of money too, well, money costs the same but earnings are up and stocks are probably up too. Oh and also debt gets inflated away more quickly. So if you can withstand the buffetting from the cost of gas and the cost of bread, inflation is just another kind of free money. One should never be afraid of inflation from a capital perspective. One should only be vigilant for the overzealous prosecution of inflation, which causes money to cost something, which means the little people can’t borrow as much to spend on their trinkets, which is bad for big people.

So in short - inflation up = good if rates = not up. Simples. Rates down, good, because free money; rates flat when they should be up, probably also good or at least no change to the current level of bullishness.

Anyway, let’s check in on our usual charts - we cover the US 10-year yield, the S&P500 in three incarnations (SPY, ES, UPRO), Nasdaq, the Dow and the Russell ditto (unlevered ETF, futures and 3x leveraged ETFs in each case) - plus some sector-specific levered and unlevered ETFs. We do this daily for our paying members here, whether you are a member of the Inner Circle or our Market Insight membership tiers.

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Short- And Medium-Term Market Analysis