The Market Paradox

Sometimes in life, bad situations at the moment can lead to positive outcomes in the future. If you’ve been slacking off in school, receiving a poor grade may be just the motivation you need to change course. That shifting mindset could catapult your success.

That same thing may be true for a poor performance review at work. It may cause you to rethink your efforts or your attitude, leading to better future performance.

In these situations, what should have been perceived as negative, turned out to be a positive.

In these situations, what should have been perceived as negative, turned out to be a positive.

The markets are having a “down is up”, “bad is good” moment right now. Here’s how Wall Street’s version goes: Bad economic news is good for lowering interest rates which is good for stocks.

Here’s how that’s played out in the past week or so. May opened with real concerns the Fed may have to hike, yes hike, interest rates to fully wrestle inflation to the ground. Then, we got the April jobs report that was much cooler than expected and talk of those hikes quickly vanished. We’ve also heard cautious tones from several consumer brands that their customers are dialing back a bit.

Then, this week, we got initial jobless claims that jumped more than forecast. Taken in totality, it’s helped long-term interest rates fall almost a quarter of a point.

Then, this week, we got initial jobless claims that jumped more than forecast.

The market is also beginning to price in a greater likelihood of rate cuts later this year. For the moment, this is the soft landing at its finest. A cooling economy that slows just enough to get inflation back in the bag while allowing the Fed to bring interest rates back to a neutral position.

That’s a big reason we believe the market has re-found its footing.

Down is up for now. But, a continued series of poor economic data will be like a student who gets F after F after F. Eventually, bad cannot be seen as good. It’s just bad.

But, a continued series of poor economic data will be like a student who gets F after F after F.

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.