Morning Jog

Bears on Parade

A procession of luminary fund managers made the media rounds earlier this week, each one sounding alarm bells over what they see is an overvalued stock market, completely “divorced from the economy”. The media appearances coincided with two down days in the market, drawing a response from the President no less, who weighed in that the “rich guys” are simply talking their book to make a buck.

I think he is wrong on this one. Not on the “looking to make a buck” part, we know that much is true. No, bearish hedge fund guys don’t cause the markets to fall – they’re just the ones brought out for interviews on days when stocks are flashing red. Viewer engagement is higher and everyone sounds smarter when the thing they’re talking about is corroborated right then and there at the bottom of the screen.

Full disclosure: I have absolutely zero data to back this up and a general understanding of what cable show segment producers do.  An eager intern can probably get to the bottom of it in a few days, but why take the fun out of it.  The working thesis is that even star hedge fund managers can’t move the markets, because at best, what they offer is a reasoned opinion about a wholly unknowable future. Unless they start reporting economic releases from the BLS, there is no market-moving information they can provide that isn’t already known.

So perhaps the Presidential scorn was better reserved for Fed Chair Powell, who also delivered a stark warning about the economy this week, but the two have history and are working on their relationship. Arguably, investors should pay attention to what Powell says, since he has a $7 trillion wallet to back him up, but there shouldn’t have been anything surprising in his statement that the path ahead is “highly uncertain” and subject to downside risk.

What is clear, is that investors are paying attention to what Powell does. Swift and substantial policy action brought much-needed relief to the markets, such that even in the depth of the selloff, investors didn’t lose faith that the stock market would be higher a year from now – and that optimism only grew in April:



Small business owners are also looking past the current collapse in sales, towards the eventual recovery, aided by fiscal and monetary policy and pent-up demand.



Maybe collectively they are the ones who have it figured out, and not the staff writers looking to attribute every up and down tick in the market to a hedge fund guru.

Enjoy your weekend.
Alex