“My purpose is to make my narrative as truthful as possible.” -George Armstrong Custer
Nothing like a huge rally in a month’s time to make everyone stop talking about a recession.
Remember that December collapse? Felt like so long ago given just how violent the upswing has been since. The end of 2018 was dominated by prognosticators saying a recession was imminent, or already underway. Strangely enough, no one seems to be saying any of that now.
What changed? One thing and one thing only: price. At the end of the day, always remember that price dictates emotions, emotions dictate narrative, and narrative results in poor decision making. Now I know that nearly everyone sees the unleashing of dovishness from Fed Chair “Papa” Powell as the reason for equities closing out the month of January so strong. But none of this should be a surprise whatsoever given just how severely flat the yield curve has gotten as the Fed has hiked short-term rates. Nor should it be a surprise whatsoever when inflation expectations have been in a solid downtrend since the middle of last year, largely due to Oil prices faltering.