The DC Today - Thursday, March 23, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 23 March 2023
⏱️ 9 minutes
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Summary
Today's Post - https://bahnsen.co/3TGllyM
That the market gave up -500 points in fifteen minutes at the end of the day yesterday but then rebounded +500 points this morning is, to me, validation of my theory regarding yesterday: that it was a closing speculative trade. Fundamentally, the facts on the table (where they are known) are not really subject to much debate.
So an interesting thing happened on the way home from processing the Fed’s announcement yesterday … Math. The Fed is now projecting a +0.4% real GDP growth rate this year, yet a +3.2% growth rate is currently showing in the Atlanta Fed model for Q1 (others have it at +2% and others at +2.5%). Regardless of whether or not Q1 comes in at +2% or +3% (and this always refers to an annualized quarterly number), you can’t get from there to +0.4% on the year without … wait for it … a recession.
But the Fed is also showing a projection of no rate cuts this year. And Powell is talking about a credit crunch coming and the financial markets doing their tightening for them. And the first two years of the yield curve are entirely inverted. And the futures market expectation for the 3-month t-bill rate (currently 4.75%) is that in 18 months, it will be below 3.5%. So what should we make of this?
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:14.7 | Well, hello and welcome to the Thursday, D.C. today. We're getting ready to come to the end of the week. |
| 0:21.6 | Excited for the Dividendon Cafe tomorrow. We're going to talk at great length about Credit |
| 0:26.3 | Swiss and kind of things happening on Sundays in the financial markets these days. |
| 0:33.2 | But for today, I want to kind of pick up where I left off yesterday because the market went down 500 points in the last 15 minutes yesterday. |
| 0:41.8 | And I said it was not in response to what the Fed said and didn't say because the Fed said it two hours before that. |
| 0:50.5 | And so the market went higher after the Fed made the announcement and then it kind of |
| 0:55.2 | stayed up there even as Jay Powell was doing his press conference and that the best theory to me |
| 1:01.6 | when if you believe as I do at Occam's Razor, the simplest explanation is almost always the right |
| 1:07.9 | one and the simplest one here was that there were traders who had a |
| 1:12.4 | long position on the idea of uber-douvishness and that they let it ride. And then at whatever point |
| 1:19.8 | they realized we weren't getting any more juice out of this. They cut loose, you had a lot of |
| 1:24.3 | selling pressure that brought markets down suddenly and quickly at the end of the day. |
| 1:28.2 | And then we were up nearly 500 points. |
| 1:29.9 | I don't think it ever got quite to 500, but I saw it, you know, above 450. |
| 1:34.2 | So kind of made all of that 15-minute dump back this morning. |
| 1:39.9 | And again, you know, there could be another explanation, but I think the simplest is usually |
| 1:44.5 | the best, and I think it sort of validates what I was saying, that normalizing for kind of where |
| 1:51.8 | things were. Now, then, several hours later today, the market did give that 500 up, but even |
| 1:57.9 | went negative for a little bit, and then it kind of came back at the end of the day and closed up 75 points. So on the week now, I think I'm remembering |
| 2:07.0 | correctly, the Dow was up 375, up 375, down 500, and now up 75. And so still net up on the |
| 2:16.8 | week, but with, you know, pretty significant intraday volatility. |
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