I always say, “the market doesn’t listen to me,” it is only a few people the market listens too ands one is without doubt, Fed Chairman Yellen.
However you would be forgiven that Yellen is saying “interest rates are going up” and the market is not listening.
This is because the market believes that the Fed is navigating policy by the level of the S&P 500.
Big money believes the Fed supports the market by direct or near direct intervention whenever it thinks it might derail and thereby tilt America back into recession.
Can that be true?
If you follow the markets you can certainly be left with the impression that there is an invisible hand levitating the market whenever it falters. However is it a real or imagined hand?
To effectively corner the equity markets you would end up with a massive long position and you would need an army of operators to achieve the result.
It would also be the highroad to disaster. Market corners do not end well, in fact they tend to end catastrophically.
Without doubt the market is polarizing. The swings form day to day and week to week are growing and this is a sign of uncertainty.
It could just be that the trend followers are in charge.
Trend following is a magic trick I investment.
As a fund you simply jump on a trend and stick to it. It delivers great return if the trend is a good one. Trend followers prosper and have more money to follow the trend. It’s a virtuous circle. Now if the trend is real because say, the Fed in juicing the markets with trillions, the trend followers look like geniuses.
If the trend following works for years why do anything but continue to keep your seat on the gravy train.
If the trend breaks, then no problems, you and everyone else can cluster together for excuses. After all you did great for 7 years, crash happens, who knew???
The other side of that trade are the stock pickers. They don’t follow trends they go against them when the market appears to be wrong. They dab at the market trying to catch stuff long when they are too chesp and go short when they are too expensive.
It is the stock pickers who are calling for a correction. The trend followers simply don’t and can’t care.
As such it will take a catalyst to end the market run we are in because the trend followers have the whip hand.
No trend goes on forever and when it breaks, there will be a big correction but right now we are in a bubble and anyone who wants to play for the riches to be made in a bubble must simply realize the first to the exit when it all comes unglued wins the game.