Who rang the Opening bell?Is it time to celebrate? Has the rally monkey been sighted and we're prepared for even more upside - or was it the kool-aid man attempting to add loads of artificial flavoring only to leave us empty?
Today's rally still has me feeling a bit uneasy about the prospects over the next few months, feels like a little too much excitement over a little too little news. It has been noted that PPI and CPI same-month correlation is extremely poor - Tom Graff posted a nice chart yesterday on his Accrued Interest blog illustrating this point and how volatile PPI readings are. As for today's CPI number the WSJ had an interesting article a couple days back about the imprecision inherent in the BLS data as a result of rounding to a tenth of a percent. This means that instead of dropping a full 0.1% from 0.3% to 0.2%, the more likely scenario is something along the lines of 0.254% falling to 0.243%. Not much to write home about.
Bonds and stocks have been humming along the last 2 days, and I don't see how they can both be right (can you guess who I side with?) - both markets are now rallying based on the same news and you suspect someone is going to get burned. No further rate hikes is truly great news for the bond bulls, not so much for stock bulls. This has everything to do with WHY there won't be any further hikes as opposed to the fact that there just won't be any. The last time the market cheered this much for a slowing economy and rapidly cooling housing sector was...it doesn't really matter. They're cheering now, and that's the point. Throw in the possibility - as unlikely as it may be - for another rate hike prior to the end of the year and the outlook for stocks is even worse. Personally I'd rather be prepared to weather the worst and try to avoid the ever-tempting kool-aid at this point.
thanks to kool-aiddays.com for the great photos
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