Remember just a week ago when stocks were struggling and the loudest voices couldn’t do anything but fret about how the economy was literally too strong for comfort? It turns out strength is not a bad problem.
The S&P 500 is higher than it was before the hot job market numbers came in last week. So is the NASDAQ. While these benchmarks are now technically overbought, this is a big step in the right direction.
And all the worry and doubt and dread about a hot economy provoking a severe punishment from the Federal Reserve has completely evaporated. A hot economy is better than a cold one.
Furthermore, a hot economy is a known fact whereas intervention from the Fed is still hypothetical. People are still getting jobs. Wages are rising. Households are paying the bills. These are facts.
The Fed might raise rates aggressively to cool things off. But then again, it might not. We just don’t know. As long as inflation keeps receding like it did last month, we might’ve seen rates go almost as high as they’re going to go.
Maybe we’ll get another little rate hike or two this year. Guess what? That was already baked into Wall Street’s glide path. There’s no surprise here, no sense that a hot job market will trigger anything unexpected.
The only people who want you to think a rate hike will be a shock are the ones who live and breathe market shocks. They want you unbalanced and unsettled. They want you unhappy.
They want you to sell your stocks, walk away, lose your nerve. But the real bulls aren’t taking the bait any more.
We saw this in the market where sentiment is backed up with real money. My GameChangers portfolio jumped a net 7% since the economy got “too hot for comfort” last Thursday morning.
Those are smaller, more growth-oriented stocks. They aren’t giants. They aren’t mature or defensive.
You tend to see stocks like these outperform when the mood in the market is optimistic, aggressive, confident. They suffer when fear is in the air.
We’re in names like Roku (ROKU). The Trade Desk (TTD). Palantir (PLTR). Some of these stocks are racking up the biggest returns we’ve seen in GameChangers since that portfolio opened up . . . back in 2010.
This is what a boom feels like. This is heat. And if you’re scared of the heat, I have to say maybe the kitchen of Wall Street isn’t for you.
Because the rest of us have started making money. And I think it’s only getting started. Sure, there will be fits and starts, twists and turns, corrections on both sides. The market rarely runs in a straight line for long.
But as inflation recedes and the economy keeps going, things are going to feel better and better . . . not worse and worse. This is the opposite of stagflation, the opposite of a worst-case scenario.
What if Goldilocks thought every bowl was just right? The bulls will rip right through the house the bears built.