Shine on You Crazy Diamond

It's amazing what can happen in a week!

All week long, analysts, economists and especially bond traders were challenging the Fed's 50bps rate cut from last month; with statements like 'the economy is too strong, it doesn't need a 50bps cut'. This morning, we got our first jobs figure that disappointed in a while (they also revised the previous two months downward), and now, all of a sudden, the stock market is behaving like a recession is knocking on the door. What happened to 'the Fed was wrong’?

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We watched earnings come out, with powerhouses like Eli Lilly, Microsoft and Google reporting. It seems, however, that unless your share prices were already depressed in their valuations, it was very difficult to get Wall Street excited and many post earnings reactions were much stronger (negative) than they needed to be. Seeing so many companies open the trading day at -13% and finish at -6%, or open at -7% and finish at 0; why such drama at the open? Are investors really that divided on what they see as a valuable investment? Is consensus harder to achieve??

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It was also a week before the election in America. The market is showing us a questionable aggregation of opinion in pricing in a winner for a race that is simply too close to call. It's a country on edge, with ballot boxes being burned and with speculation that results will be challenged in court, regardless of the outcome. Podcasts hosts are bringing in millions of viewers (or listeners, really), advertisers are having the run of a lifetime with the amounts of money being splashed around and the pre-voting suggests that the USA will have the highest level of participation since 1896.

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Meanwhile, it was also Halloween week. I made my way to New York where we celebrated in Greenwich Village and watched the annual Halloween parade along with 10 to 15 thousand other people. Taking place on the cusp of NYU, the streets were packed with people dressed up and I can attest, just like with everything else they do, New Yorkers don't hold back!

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So, it seems like many people in the financial and political world want to wallow in their temporary misery, desperate to be right about their claims that something is broken (or at least that's the prevailing?thought at the moment) while the everyday citizen resiliently continues to find moments of joy between their everyday responsibilities. It's also why I'm here in New York, to fulfill a lifelong dream of watching David Gilmour perform live.

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Between earnings, this election and the broad range of exaggerated opinions about stocks or the economy, we expect markets to move further from here. We will be digesting this information and assessing if and what we will change once this cycle is set and done. Our message to our clients and investors is as follows; the economy does not change trajectory as often as the market changes its mind. The more of this back and forth we see in extreme opinions, the less efficient the market becomes. These inefficiencies are exactly what we look for when we invest; just like when Nvidia shares at one point dropped 66% in 2022 because of rate hikes and we happily bought for our clients, we are keeping our eyes open for similar trades.?

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Enjoy the weekend - we'll be ready to trade come Wednesday morning.

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