We discuss the Fed’s hawkish pivot and whether it is rooted in reality or an effort to use its words to convince the market it is serious about inflation. We also look back to prior tightening cycles as a frame of reference for potential equity market weakness, as well as exploring the omicron variant’s effect on society, supply chains, and the economy more broadly.
We are done with memes as a theme. The market, however, seemingly is not. Look no further than December 23, when a giant ape was delivered to oppose the famous Wall Street bull. A little too on the nose, as far as symbols go.
Will and Adam discuss the market’s reaction to the last big event of the year, i.e., the Fed’s December meeting. We also try to discern what its stance tells us about the prospects for growth, inflation, and the omicron variant. We also explore the structural reasons inflation might decline despite the shrinking pool of labor, as well as the widening chasm between the performance of the stock market and that of the individual stocks of which it is comprised.
For those unfamiliar, this is Gene Wilder playing the title character in Willie Wonka and the Chocolate Factory. Over Thanksgiving, we watched the movie again, and it seems appropriate to use it as inspiration for our newsletter this month, given the market’s current state is as confusing as any we have seen, leaving us to pure imagination to try to decipher what might be next.
After a brief hiatus due to technical difficulties, Will and Adam return to a market fraught with the same. We explore how index performance masks the performance of the average stock, not to mention how the U.S. has diverged from every other market. We also examine the Fed’s shift from its transitory narrative, debate whether proposed tapering is likely bark or bite, and end with an analysis of the Biden administration’s curiously active November, especially against the backdrop of the Omicron variant.
With football mania sweeping Cincinnati, we talk about some other manias that are helping lift markets to all-time highs. We also juxtapose the most recent monetary policy decisions of the Fed and Bank of England and how each reflects a slightly variant view of the variant. Finally, we head down the rabbit hole to talk COVID, cryptocurrencies, and oil.
Puns: They are seldom funny. Neither are memes. However, we combine the two this quarter and hope, as we see in math, that two negatives make a positive. Our title pun combines reversion to the mean, a concept wherein a statistic unmoored from its historical average, i.e., its mean, tends to revert toward that level, with meme. For those who may not know, a meme is defined by Oxford as “a humorous image, video, piece of text, etc., that is copied (often with slight variations) and spread rapidly by internet users.”
It was almost 20 years ago when the gang at South Park titled an episode “Simpsons Already Did It,” a quasi-homage to The Simpsons’ longevity and off-the-wall shenanigans. Given The Simpsons are still creating new episodes (some derivative of prior episodes), it is unsurprising we have reached the point where life is imitating art enough to inspire enough content for one of our newsletters. Our aim here is to educate and hopefully avoid the ire of Jeff Alberston (pictured below) by writing our worst newsletter ever:
We return with a new format but provide updates on some old favorites: inflation, complacency, and valuation. We also explore how the “sky is falling” narrative is changing how investors allocate capital, especially in the energy sector, why legacy producers in the Middle East are okay with the Mad Max scarcity scenario, and how U.S. producers are the Jekyll and Hyde that moodily swing prices. Stay tuned until the full time whistle, when Will gives the team talk on speculating with leverage.