Making Sense

The past few years have entailed many instances of markets “not making sense.”  The latest iteration I hear about a lot is stocks’ continued rise in the face of a Fed hike, a bond meltdown, political uncertainty and an EM currency crisis.

It’s important to understand that it has been years since stocks traded mostly on fundamentals.  At least, if not more important, are the yen carry trade, the oil-driven algos and other central bank interventions.

And, all this has occurred against a backdrop of aggressive corporate leveraging in a historically low interest rate environment in order to buy back stock and, thus, leverage what little growth in sales/cash flow most corporations have been able to muster.

With six weeks to go until year end, the market has a good strong whiff of the barn.  With TPTB giving it the whip, we shouldn’t be surprised that it’s seemingly picking up momentum.  The big question is whether we can get there without stumbling.

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