A thread of good things that are being framed as bad things, but could actually be good things.
🧐
🧐
Many things that push stocks up or down can't be painted with a good or bad brush.
There's a lot of grey, and most of it is up to the crowd's interpretation.
But lemme tell you: there are a few factors out there that I think are getting a bad rap.
There's a lot of grey, and most of it is up to the crowd's interpretation.
But lemme tell you: there are a few factors out there that I think are getting a bad rap.
YIELDS.
Yields are rising quickly.
Sure, higher yields can = a higher discount rate, and quickly rising yields can derail the stock market (like we’ve seen before).
Yields are rising quickly.
Sure, higher yields can = a higher discount rate, and quickly rising yields can derail the stock market (like we’ve seen before).
But this particular yield rally is like one we’ve seen in early stock rallies/bull markets, and it’s just a sign the economy is recovering.
Nothing nefarious to see here, folks.
(I dig into yields' rise more in this thread)
Nothing nefarious to see here, folks.
(I dig into yields' rise more in this thread)
https://twitter.com/callieabost/status/1362138911045152768?s=20
HOT STOCKS SELLING OFF.
Hot stocks have hit the skids in the past few weeks.
Apple is down 11% from its latest peak. Tesla is down 15%. Peloton is down 23%.
Hot stocks have hit the skids in the past few weeks.
Apple is down 11% from its latest peak. Tesla is down 15%. Peloton is down 23%.
Market drops may stink in the moment, but believe it or not, they are actually good things!
Even the healthiest, strongest stock markets fall from time to time, and you usually see some “profit-taking” (selling) in the big winners when this happens.
Even the healthiest, strongest stock markets fall from time to time, and you usually see some “profit-taking” (selling) in the big winners when this happens.
In fact, there were 5 drops of 10% or more from 2009 to 2019, and the S&P 500's value quadrupled in those 10 years. 
I know it seems backwards, but drops like this can be especially good if you're waiting to buy into the market and you're optimistic the market will recover quickly.
Think of it as stocks on sale!
Think of it as stocks on sale!
https://twitter.com/callieabost/status/1310618596490571777?s=20
INFLATION.
Inflation is a good thing for the economy, even though some see it as a naughty word.
TBH, inflation CAN get out of hand and the economy can overheat, and that’s a bad thing for stocks (hellooooooo tech bubble!).
But we’re nowhere near that point yet.
Inflation is a good thing for the economy, even though some see it as a naughty word.
TBH, inflation CAN get out of hand and the economy can overheat, and that’s a bad thing for stocks (hellooooooo tech bubble!).
But we’re nowhere near that point yet.
Core consumer prices (measured by core PCE) haven’t consistently grown more than 2% a year since 2007.
Why is 2% YOY growth important?
Because that’s what the Fed is watching for, and the Fed is the puppet master of the economy.
Why is 2% YOY growth important?
Because that’s what the Fed is watching for, and the Fed is the puppet master of the economy.
It takes a lot to get to that level, and other factors (demographics, globalization) are keeping the rate of inflation low.
So yeah, runaway inflation is definitely a risk, but I think it will take *a lot* for inflation to really be risky to growth.
So yeah, runaway inflation is definitely a risk, but I think it will take *a lot* for inflation to really be risky to growth.
Bottom line: things are a-changing.
Change can be uncomfortable, especially when life still feels so messed up.
But this still looks a heck of a lot like a recovery to me.
Change can be uncomfortable, especially when life still feels so messed up.
But this still looks a heck of a lot like a recovery to me.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
