Good News Is Definitely Bad News Now

Good News Is Definitely Bad News Now

For once, "scorching" isn't hyperbole. The US services sector is on fire, according to the last of this week's top-tier US data. At 69.1, ISM services printed a new record high in November (figure below). Consensus expected 65. The range of estimates was 62 to 67.5, so the actual headline was well ahead of the hottest guess from 60 economists. The final read on IHS Markit's gauge for November was 58, up from the 57 flash print. Although still very robust, Markit's index telegraphed a slight
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6 thoughts on “Good News Is Definitely Bad News Now

  1. For the first time in almost two years, investors face the prospects of navigating a market without the support of $ trillions in government liquidity.

    2022 is an election year so there won’t be emergency liquidity coming from Congress, and the Fed is backed into an inflation corner so no emergency liquidity from the Fed.

    I think the reflexive reaction to marginally good or bad news is misguided. “Bad” would have to be shockingly bad to have any chance of coaxing more liquidity from the well. “Good” is already baked in and at most might accelerate the taper/hikes by a couple months.

    No matter what the year brings, market denizens, we’re on our own. The dealer is no longer on our side.

    Since playing with a fair deck is not as safe as playing with a stacked deck, some chips will be – are being – pulled from the table.

    1. You make a fair point regarding “no new money” (…read my lips, eh?). But what about all the existing money, which is NOT going to be actively sucked back into the printing press? It still needs to find a home and produce something resembling a return. Front end rates are still paltry, even with a few rate hikes now priced in. And any fixed income product with a longer duration has an ongoing risk/reward problem. So, equities it is, with headlines driving sector/factor rotations from one month to the next. I’m beginning to see the wisdom in the 4,600 targets for YE 2022, i.e. an “either/or market” churn that goes nowhere at the index level.

      1. I figure that money already in the market or in cash isn’t likely to hurl itself into the abyss to halt a correction – it’s more likely to sit on the sidelines or run to cash. Well, except for the intrepid retail dip buyers. Thank goodness for them, but they wield billions not trillions.

        1. OK understood, but don’t forget other sources of “steady inflows”, e.g. buybacks, 401k contributions, public pension contributions, inherited real estate liquidated and put into securities, etc.

          Stocks had good runs before QE was a thing. Can happen again.

  2. H-Man, not sure Omicron or Delta are going to derail this economy which seems to be running on nine cylinders. Yes people are getting sick but there are no refrigeration trucks showing up at the hospitals.

    1. And because of that, fiscal aid is over. Kaput.

      Wage hikes are being offset by price hikes.

      Not that the underlying economy or earnings matters to stock prices. (Not said sarcastically.)

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