Everything old is new again. The power of using the narrative to inform our investing choices is as evident as ever. Today, we’re going to touch on narrative briefly in order to add a twist, but we’re going to concentrate on a very bold money-market call on market direction.
As a reminder, the market narrative is the overarching concept that is central as a market driver. Since the U.S. Presidential election, that narrative has been the Trump growth agenda based on three pillars: lower taxes, less regulation, and more infrastructure spending.
With the new tax reform bill signed into law, one of those legs is firmly in place. The reduction in regulations is ongoing, but enough changes have been made (largely through executive order) to say that two out of three are largely in place. The infrastructure plan is now looking like it is going to take some time to enact…
We’ve also seen evidence of our “narrative in waiting” rearing its head from time-to-time; the Fed Great Unwind narrative will be the foundation of tightening monetary policy and will be accompanied by rising interest rates – and a more challenging market environment.
Admittedly, our current blended narrative gives us two things to watch instead of just one. But as we seen with the “tariff trouble” issues – the Trump growth narrative is still the dominant one. It’s the most likely to derail the global economic growth train – and the market’s reaction to every tweet and comment shows this fully.
I’d also like to introduce a new sub-narrative that we need to keep a close eye on, because it will help us navigate the most popular stocks on the planet.
But first, I’d like to offer some market direction clarity, because I believe the technicals on the charts are confirming the narrative in a big way. And the markets may have just set the perfect Bear Trap. What’s a Bear Trap, you might say? I’m glad you asked…