Push and Pull

The push and pull in the markets these days feels unique, but it’s important to remember that there is always a push and pull and it always feels unique.

At all times there are good things and bad things leaning into each other, and buyers and sellers reacting to these items set the prices for stocks.

Today’s variables causing the current push and pull:

The good:

Earnings growth this year is explosive

Consumers and businesses just got a massive tax cut and they’re spending it

Buybacks could shatter records this year, with Goldman Sachs projecting $625 billion worth for calendar 2018

The bad:

Money is no longer free, rates have gone up quite a bit

Blah blah blah Trump said this or did that

European and EM economic data might be softening or no longer living up to the “synchronized global recovery” narrative

Will the good stave off the bad, or will the bad overcome the good? Or will some other factors we’re not even discussing come to the fore?

Fast-forward three years and we’ll have a whole new set of pushes and pulls. Maybe rates will be coming down again. Maybe the Fed will make a policy error it can’t quickly undo. Maybe labor costs will explode and inflation will ramp. Maybe there’ll be a war or an impeachment. Maybe we’ll have a decade of sustained corporate profits growth and float-shrinking buybacks.

We don’t know what will be pushing or pulling us in the future, but we can rest assured that there will be factors. There always are. It’s great to understand them and it’s perfectly reasonable to consider their impact on the investment markets. It’s a mistake to think that things will ever be either all good or all bad. It just doesn’t ever quite work out that way.

In strengthening conditions, there is underlying weakness. In worsening conditions, opportunities begin to peak out from their hiding spots.