Why The Market Sold Off Today

Today, everything under the sun sold off. 

No, it wasn’t quite as bloody or panic-driven as the market in March of 2020, but it certainly sent some into crisis mode.

So, let’s break down what happened, why it happened, and what to do about it.

The Dip Explained

Market corrections are nothing new.

Everyone knew that it would be any day now that the correction would start — the market simply became too greedy too fast.

It’s likely that all stocks & the crypto market will fall this week, but just like Cathy Wood said, this isn’t anything to worry about in the long term. The world is about to change in drastic ways and tech investments will be the winning bet. If you need proof just look at how it’s shaped society and the systems that run it.

Tech will govern our world and we’re getting close to that reality.

Not all tech will go up . . . but, like the dotcom bubble and crash, a lot of companies were weeded out and if you’ve done your DD and know your picks then these bloody days ahead are no sweat. Nothing goes down quicker in a bear market than stocks with a forward-looking overvalued PE. (Tech Stocks).

They will also be the first stocks to recover massively because they will be oversold — again because our future is in tech.

Look for tech with sound fundamentals and a growing market. There will be some bargains picked up next month.

Why Bonds Cause Stocks To Sell-Off

Normally, we’d be entering a real corrective period right now (think 2008-2009), but the game has changed.

This is the essence of the “Fed Put” or “Greenspan Put”, i.e., Stocks are not allowed to go down. (https://www.investopedia.com/terms/g/greenspanput.asp)

Every time over the last year we’ve seen stocks start to slide, suddenly there’s trillions of magic money fired out of the fiscal bazooka.

Already we’re seeing prep work being made for Stimulus 3.0 (https://csbcorrespondent.com/market-commentary/market-update/february-22-2021). The virus curve will flatten with warmer weather and increased herd immunity. The Biden Administration, having just taken over, has every inventive to keep the unemployment numbers low so they’ll keep pounding more cheap money into the economy and encouraging “jobs jobs jobs” so they look better than the Trump admin on paper, even if the economy is actually in worse shape.

This is a K-shaped recovery turning into a K-shaped economy.

Jerome Powell’s Comments Today

I read some takes on his comments as it being a “nothing burger”. I disagree with that.

“We will continue large scale asset purchases even though the outlook is improving”, i.e., Powell’s super important quote of the day.

Basically, he said, “we won’t let stocks go down.”

This is because The Fed revised its approach last year to inflation. In the past, it would levy preventive rate hikes when it saw unemployment drop, thinking that a stronger job market would push up prices. Now, it has adopted an approach in which it will allow inflation to average above 2% for a period of time before moving to tighten policy.

Essentially, their new approach is: Unemployment Numbers > Inflation %

What I found to also be the case is that Powell’s comments were a pretty seismic shift in terms of labor market targeting, too:

Interestingly enough FFR futures are generally quite efficient in their pricing over the short term, indicating Fed communication is quite effective in telegraphing intent. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr491.pdf

Well, how do you do that? In fact, where should you be looking overall?