With apologies to Dave Callaway of CBS Marketwatch, whose title I have shamelessly stolen
It’s never the news, but the reaction to those headlines which is so telling as to the present health of the Markets. Since Monday’s drop, when the up down volume on the NYSE was as much as 12 to 1 negative, the markets have been acting much better – despite the negative headlines.
Shaking off the discovery of a terrorist bomb planted under train tracks outside of Paris, the Nasdaq managed to close positively (the Dow seesawed all day, ending up in the red). Today, the markets shrugged off an FBI warning to petrochemical plants along the Gulf of Mexico via the Texas Coastal Regional Advisory System.
Indeed, the ongoing tendency to grossly oversimplify the ups and downs of the markets has been in full view. Terrorism is the headline story, but over the years, we’ve borne witness to far too many artifices in the employ of elucidating why markets may be up or down at any instant. Feeble attempts to explain every jag and twist earns our derision – deservedly so – on a regular basis.
So you could imagine our derisive snickers at the embarrassing tendency to blame ascending or falling Presidential candidates as an underlying cause of market moves. It is with bated breath that I await someone’s – anyone’s – tortured explanation of the market’s move off of the lows this week.
Richard Clarke – a 30-year career bureaucrat and anti-terrorist czar who had worked under four Presidents – made devastating accusations in a 60 Minutes interview Sunday night. It’s the most damning indictment of the incumbent in an already bare-knuckled political race, and has dented the President’s re-election campaign.
If you follow the analytical absurdity, the market should be sinking ever lower, as the incumbent got (unfairly?) knee capped by a formerly trusted employee. Yet the markets powered higher, as the 9/11 panel drew front page coverage and was the lead story on the evening news .
Won’t one of these armchair political analysts please explain this to me?
The reality is that markets do what they do regardless of these externalities. When they are technically weak, when sentiment is too extreme, they are vulnerable to dislocations, be it terrorist attacks or nattering nabobs; When sentiment is moderate and funds enjoy positive cash inflows, markets shrug off bad news. It’s just that simple.