I’m seeing a lot of chatter about a stock market correction today. What’s going on?
Ten Percent Correction
Official Correction
I see lots of headlines including the Wall Street Journal.
S&P 500 and Nasdaq
Jim Bianco says “I’m surprised I see no screaming red headlines about this. It tells me it is not viewed as a big deal.”
I am not sure if this is screaming, but a Wall Street Journal headline reads Stock Market News, Oct. 27, 2023: S&P 500 Ends Lower, Enters a Correction.
The position on the WSJ was #2.
The S&P 500 follows the Nasdaq, which ended in a correction earlier this week.
The week was marked with even bigger swings under the surface for everything from technology heavyweights to oil giants.
Alphabet’s earnings disappointed investors, sending the stock down almost 10% for the week, the worst showing since November. Chevron shares lost more than 13%, the worst weekly decline in more than a year, after the company reported quarterly earnings that were sharply lower than a year earlier.
JPMorgan shares fell after Chief Executive Jamie Dimon announced plans to make his first substantial sale of the bank’s shares since taking over nearly two decades ago.
Correction of Resumption of the Bear Market?
A widely-used definition of a correction is a 10 percent decline from a recent high, but to me that seems more fitting for a bull market or a correction higher in a bear market.
Correction Chart
Is that the right way of viewing things or is the lead chart?
Correction should mean counter-trend but the trend is down. Thus, I propose the correction was the rally.
I suggest we had a 32 percent bear market correction higher and the bear market has resumed.
Rallies of 50 percent or even 100% are common in long bear markets. Until a new high is set it’s a mistake to assume a new bull market has started.
Yellen Says Higher Yields Reflect Strength of the Economy
Please note that Yellen Says Higher Yields Reflect Strength of the Economy and IRA Success, Not the Deficit
Is this correction just another reflection of the strength of the US economy?
Gold and Bitcoin Surge with Treasuries Hammered, What’s Going On?
Also note Gold and Bitcoin Surge with Treasuries Hammered, What’s Going On?
The bond market is getting hammered along with stocks but gold and bitcoin are on a tear and have been acting mostly together for months.
You can cheer along with Yellen if you like, but I don’t think the economy is all that great. Inflation sure is. And so is deficit spending helping create an artificial boom.
A market nobody cares about that’s moving lower and no panic. Maybe after 20 or more percent. Long way down.
If markets top on good news, and bottom on bad news……where do we stand now?
Maybe it should be rephrased….Markets top on good propaganda, and bottom on bad propaganda.
Correction…..Markets top on good propaganda, and bottom on the truth.
Big jolts down OR up out of nowhere should be flashing red warning signs of danger ahead. Its not normal, its not healthy, and it shouldn’t be a sign of anything other than illness. Or do violent bouts of coughing get one a diagnosis of “hey, he’s clearing his air passages and will be super-healthy tomorrow morning” instead of “geez, sounds like emphysema…!”
“I’m surprised I see no screaming red headlines about this. It tells me it is not viewed as a big deal.”
When everyone’s talking about it, it doesn’t happen.
MSM won’t talk about this as it doesn’t fit the Democrats narrative of “The economy is great”!
Party is over.
The party on the second floor is still going.
In my opinion, this will be the worst financial conflagration since the south Sea bubble, which proceeded the French revolution. Our financial engineers are so venal and also stupid, which is a lethal combination. We need to eliminate the fed like Jefferson and Jackson, and have a good life again.
I would like to make one other brief comment. While I read Mish regularly and have since he started one comment that I have missed, which may or may not have been made, is that the financial Kleptocrats do not telegraph what’s behind the curtain. So while investors are reading the tea leaves and counting the number of angel dancing on a pin, many are not considering all the hidden cockroaches in the wall like derivatives, misuse of funds, hidden debts, and overall corruption. This doesn’t come out until the damn breaks, in the meantime people reassure themselves with Wall Street blather.
Market will go down more because many investors will become fearful and sell into the decline this will be the blood bad phase but not without some reversals . . . then their will be lots of buying opportunities as usual . . .
This is why there are plenty of job openings – Covid Vaccine Injuries and Deaths:
Why Are Death and Disability Rising Among Young Americans?
America’s labor force is facing a crisis, and no one knows exactly why. According to data from the Bureau of Labor Statistics, the number of American adults considered unable to work grew by more than 3.5 million since January 2020, with 1.5 million added just in the first nine months of this year.
That’s a concerning 12 percent hike. But among the labor force, in particular, the disability number grew an astonishing 33 percent since January 2020. Over the same time period, America has seen what one insurance insider calls an “open secret” of increased excess deaths—the number of people dying above what is expected. These shocking developments are surely contributing to ongoing labor shortages. People are leaving work at younger ages, in greater numbers, and from diseases seen mostly in later life.
https://www.newsweek.com/why-are-death-disability-rising-among-young-americans-opinion-1837006
Hedonism.
One thing: during covid in the EU cancer treatments were down by 40%. Either everyone miraculously got well, or…. a lot of people were going to die over the next few years. I don’t know what the treatment rates were for the US but they likely were similar to the EU. Hospital admissions were down 50%, my MD did this virtual crap.
This sort of thing might explain the increase in death and disability right there. Call me a nut job, but I’m not convinced that the vaccines were safe either, if so, myocardial effects could well be still resulting in an excess of deaths.
It’s a Fair point. My late wife was in Mayo Clinic with terminal colorectal cancer. They called me and told me I had to pick her up because they were shutting down all the wings because of Covid. I guess that was so they could build the government because of shortage of space. What a racket! Fauci is the biggest serial killer in the world has ever seen.
I totally agree about the excess deaths (approximately 40%) and the labor shortage but I’m not sure to what extent it’s affecting the economy. It’s costing the tax payers a lot of money for the additional people on disability. People on disability usually get free healthcare and food stamps. The excess deaths are primarily 18-49 years old. Dead people don’t need housing, food, clothing, etc. It’s not easy to live on disability so they probably live with another adult(s).
click bait headline for a bankrupt imperial market of phoney baloney numbers. debtors prison is future of empire. with raging price inflation of daily bread. houses and stocks are gonna be cut in half. in real numbers try making that 75%. lots of people are gonna be upside down in houses taxed to death by local and state governments. watch the future war mongers force conversions of ERISA accounts into only. TBILLS. war effort. they’ll seize stocks instead of gold this great depression………nobody owns gold. APPLE nationalized…………………bye bye pikers and middlebrows and believers in fairy tales. the employee serfs are fucked. working and retired.
After the Great Finincial Crisis, who would have thought that the shenanigans of the Fed could have extended things as long as it has. I’m waiting to buy long bonds assuming the pivot will be coming. But, who knows? Maybe a flood of new government spending and inflation will force interest rates higher and maybe we’ll get a stock market melt up. I think the later is ultimately where we’ll end up. But it would be nice to take advantage of an intervening deflation/inflation cycle if it occurs.
Interest rates still have a couple more months before the pivot. At that point I would put money in CD’s and US bonds with durations between 18 and 24 months. The longer term trend is the remaining 15-18 years of the 60 year interest rate cycle, much like that between the mid 1960’s and early 1980’s.
Repeat after me Mish…
“price rises are not inflation”…
“price rises are not inflation”…
“price rises are not inflation”…
…there is no real inflation, just policy-driven price rises to create the illusion of inflation.
lockdowns, sanctions, netzero, illegal mass immigration mask demographic deflation.
Exactly right! I was gonna say it myself, but I get sick of trying to explain Economics 101 to people that don’t give a rats ass.
Thank you
Correct.
Price rises are the inevitable effects AFTER the inflation.
When there’s lots of spare money prices go up.
DM me when the S&P 500 breaks through 3,000 and then I’ll start to pay attention. I’ve been sitting on the sidelines for at least 9 months, so I’m in no hurry.
So the annualized interest expense on our $33.6T in debt just hit for Q3. It’s not good news. How does $981B sound. That’s up $71B in one qtr. Yikes! And remember, $7T is rolling over before the end of FY ’24. The graph since Q3 2020 has literally gone:
y = ab^x. See for yourself.
https://fred.stlouisfed.org/series/A091RC1Q027SBEA
There’s a reason why the Fed is ignoring all the economic signals about an accelerating economy & inflation. It’s called a debt trap, and we’re squarely entering into one. I hope that the economy keeps heating up. Q2 tax receipts were a paltry $2.781T annualized.
Just imagine if we’re lucky enough to find ourselves in a real recession a year from now? Tax receipts will continue to fall while interest expense will keep rising dramatically over the next several years.
Hell, we’re about to be supplying two wars el pronto and we might find FJB having to commit to an actual military conflict with Iran.
What does Mish think that’s going to do to the S&P 500? Instead of the cheesy, clickbait headline we got today, it will be something simple like:
“HOW FAR WILL IT FALL?”
People, buckle up. It’s about to go sideways bigtime!
All true. So what do we do about it? The Fed has no really good choice here. Probably the least attractive but the best case choice would be to start aggressively raising rates in the front end again to cause a serious downturn in the economy and the market to allow the market and the country to heal. That takes about a decade or two.
On the other hand we can try and grow our way out which risks run away inflation and potentially losing the currency. Losing a hegemonic currency is not a thing the Pentagon, Treasury or the State Department would relish. So its back to a drawn out and potentially deep recession. That is a path that is at least manageable. Run away inflation with spiraling long rates will destroy the banking system. I submit if the Fed has to choose between a depression or the destruction of the banking system they will choose to throw us all under the bus
The choice has been made.
We are in the path of the bus.
Under the bus we go for sure.
Humorous as always, LH!
IMHO what needs to happen is Congress has to commit to a 7 year balance the budget plan. We have to start doing something about the structural $1.5-2T deficits the UniParty has created. Next, the Fed needs to be Congressionally barred from manipulating the yield curve of treasuries of maturities greater than 5 years. The Fed simply should not be mucking with the long end of the yield curve, specifically the 10YT. Housing should rise & fall without any direct intervention from the Fed or Congress.
The next problem is that Congress is going to trot out rent & mortgage relief as soon as we hit a severe enough recession. By my estimates, this means unemployment above 6%. Again, this is not good for housing, because it creates massive bubbles. Rent & mortgage relief are probably more at fault than ultra-low interest rates in terms of causing the housing bubble. The reaction to COVID was massively overdone, and it has solidified WAY TOO MUCH governmental intervention into markets & things like my personal healthcare.
There are at least 10 really meaningful things that need to be done, but IMHO these are the 3 that need to be deal with.
As a really nice to have, Congress should end section 230. As we approach the 2024 election and especially once there’s a postmortem done, we’re going to see massive big tech interference via AI. You can’t correct all of these problems when big tech is gaming the system. This last point might be a bigger issue than our massive debt & deficits, because keeping section 230 in place will ensure the ruling class keeps power away from the people.
Ben, $71B is only about an additional $145 per month payment for everyone in the US getting a paycheck. A mere pittance. Just borrow at 5% to make the payments on the new higher balance.
Correction? Bear market? What does it matter? All that matters to me is taking advantage of whatever opportunities present themselves to investors.
Still happy with my oil and gas investments. Because of them I was up on the day, the month, and the YTD. After two amazingly good years in 21 and 22.
The stocks remain bargains at $80 WTI. Balance sheets are the strongest they have ever been. Free cash flow the highest ever. Valuations very cheap compared to any other market sector.
A great place to “hide out” amid all the volatility. 2024 will be another good year as the companies are going to be returning a lot of their excess FCF to shareholders.
I heard your neighbours have filed complaints regarding all those barrels of crude in your garden, the other day someone observed how barrels were being rolled into your living room… Was that sweet crude ?
Thanks, Papa.
I’m going to follow your advice.
Because you never lose any money.
If you did you would tell us.
Right?
Of course I lose money. There are always individual stocks that I lose on. But I tend to dump the losers and refocus on the winners. If you look back on every stock I have mentioned over the last several years, you will find mostly winners. If you bought everything I mentioned you would be up quite a bit overall. But yes, a few of them are losers. Can’t avoid it.
The economy is slowing down. We got so many resumes for ONE opening this month that we had to stop accepting resumes. It is only a matter of time before unemployment spikes imo and leads to slower consumption and down we go. Will the Fed cut rates when this happens ? I doubt it. The problem they created (wage/price inflation) is finally coming under control. I said then the only solution for rising inflation is rising unemployment. I expect a rash of foreclosures and mass layoffs to increase if things keep going this way.
The world is a mess but the only thing that can fix this is real pain and hardship which no one has really faced since 2007-2009.
a consequence of interrupting healthy economic cycles with ever lower interest rates by a corrupt worthless FED …
It’s got a way to go before it looks like the Russell 2000, which is about 33% off the 2021 high.
Market structure is what defines a bear or bull market. Volume and advance/decline ratio help to confirm the trend. That said, the Elliott wave down from the early 2022 high was choppy, so it was the start of a new bear market or part of correction before one last rally in a bull market. The wave from the 2022 bottom is choppy too. It could be a bear market bounce or wave B of a flat correction in a bull market. The wave starting from the July 2023 highs looks motive. It could be the start of bear market Wave C or Wave C of larger Wave 4 flat in a larger bull markets.
So with no more accuracy than a two-armed economist, I conclude that….
Who knows …this world is a f n mish Mess, a mesh Miss a miss mesh a me …fck you know what I mean …
overlay the Dow Theory on current market action. Are we now just in phase #2?
Dow Theory stipulates that transports fail to make a new high when the Dow does.
This years high for the Dow was lower than 2021’s and so were transports.
I’m not sure if that’s confirmation
.