Nothing makes sense

Why this market confuses everyone [Click to view in browser](. Freshly Squeezed Battery technology has enormous potential. Investing in the sector can be tricky. That’s why Insider Monkey covers the [10 Best Lithium and Phosphate Stocks to Buy Now.]( Need a market blueprint for the week? [Hedge Accordingly has you covered.]( Globalization can be good or bad, depending on your point of view. [Yves Smith writes an interesting take on globalization, specialization, and the division of labor.]( Draftkings (DKNG) is about to acquire Golden Nugget Online Gaming (GNOG). [StreetInsder has everything you need to know.]( --------------------------------------------------------------- [Hire a Pro: Compare Financial Advisors in Your Area]( Finding an advisor that fits your needs doesn't have to be hard. SmartAsset's free tool matches you with fiduciary financial advisors near you in 5 minutes. Each has been vetted and is legally bound to act in your best interest. [Get started now.]( Sponsored --------------------------------------------------------------- Why this market confuses everyone [Confused Jimmy Fallon GIF by The Tonight Show Starring Jimmy Fallon] - The new-new normal breaks all traditional correlations - Money is forced into speculation due to a lack of better options - Extra stimulus should shorten the Fed’s taper timeline - Most markets are likely to decline when that happens This market is the new-new normal. At least that’s what someone on television told me. But what is it about this market that makes it so unique, so incomprehensible? Traditions fail Traditional investing ideas failed the last decade in the face of extraordinary growth. Yet, many traditional correlations still held. Higher equity prices led to lower bond prices. Lower bond prices drove down utility stocks. All of that has gone out the window. Here are some more examples beyond those listed above: - Meme stocks with little intrinsic value outperformed value stocks by a huge margin - Small-cap risk can’t catch a bid while the market is awash in cash - Unemployment remains high while employers can’t find workers - Markets hit new all-time highs while the S&P 500 volatility index (VIX) remains elevated - Cryptocurrencies rose and fell based on tweets - Dogecoin, a cryptocurrency built as a joke, saw serious investor interest We can rationalize each piece individually. Taken together, it confounds the senses. And it’s driven by one key ingredient. Money with nowhere to go This isn’t a hit piece on the Fed. They did their job when needed. And history has shown from the Great Depression that raising rates too quickly creates more chaos. Yet, we cannot be ignorant of the outcome. Specifically, their and other central banks distortion of Treasury markets. Bond prices remain incredibly high despite ongoing inflation and record equity prices. That shouldn’t be. Yet, the Fed balance sheet continues expanding well into the recovery. What needs to happen This past week, Senator Joe Machin of West Virginia called on the Fed to curtail their bond-buying program. And he has a point. The Fed’s programs and policies were based on the fiscal stimulus of the time. Since then, we’re looking at not just the bipartisan $1.2 trillion stimulus, but another $3.5 trillion after that. At a minimum, that should change their timing. Otherwise, you continue to throw fuel on demand when the supply cannot keep pace. This isn’t to say support isn’t needed for a subset of Americans. Quite the contrary. Damage wrought by the pandemic will endure years into the future. But the Fed can’t help those most vulnerable by spurring business debt. Not when they don’t have the necessary labor force. What we can expect Markets will not like the taper discussion. It’s extremely likely the Fed pulls back on the throttle before supply and labor constraints resolve themselves. That leaves industries with enough demand unable to meet orders and companies with heavy debt without further (good) funding options. High-growth names will almost certainly take a hit. Their entire rise has been built on future growth discounted at an opportunity cost rate close to 0%. Theoretically, utilities and high dividend-paying companies should get slammed. Although somewhat obvious, treasury markets will fall. That is unless all other central banks keep rates insanely low, making the U.S. Treasury market look like a value comparatively. Memes and speculation can still push stocks and certain markets higher. But their influence will wane and become more narrow. Our hot take Bears were wrong for more than a decade since the Great Recession. There is one key difference between then and now. They didn’t have data nor earnings and revenue numbers to support their theories. Here, we have crystal clear data points: inflation, earnings, unemployment, and Covid cases. Those are the themes that will drive investments for the foreseeable future. We’ll leave you with one final chart that compares the Nasdaq 100 (QQQ - Black), S&P 500 (SPY - Red), and Russell 2000 (IWM - Blue) ETFs percent change from January of 2020 to the present. To ensure delivery of all emails, [whitelist us](. You are subscribed to email updates from [InvestingChannel](. To stop receiving these emails, you may [unsubscribe]( now. InvestingChannel, Inc., P.O. Box 118 New York, NY 10018. Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or against losses. No representation or implication is being made that using any of these methodologies or systems will generate returns or ensure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](