These are the days of miracle and wonder for the financial markets.The Boy in the Bubble Market

I recently had the privilege of watching iconic singer/songwriter Paul Simon perform in Santa Barbara, California, and the show was absolutely amazing.

The brilliant set, complete with numerous classic Simon tunes, began with his Graceland album hit, “The Boy in the Bubble.” It’s one of my all-time favorites because of its alliterative lyrical content, as well as its social commentary, exemplified here in the following chorus:

These are the days of miracle and wonder
This is the long-distance call
The way the camera follows us in slo-mo
The way we look to us all
The way we look to a distant constellation
That’s dying in a corner of the sky
These are the days of miracle and wonder
And don’t cry baby, don’t cry…

As I listened to the opening number, I drew a mental comparison between financial markets and the message of the song.

That message is largely the wonder of our current age—one that abounds with amazing technological and medical developments, and yet one fraught with the peril of violence, militarism, terrorism and undue pop-culture worship (check out the entire song’s lyrics here).

The Boy in the Bubble Market That’s sort of the case with markets right now, as the broad-based S&P 500 Index now wondrously trades just shy of its all-time high and the world frets over slowing global growth, China’s grinding slowdown, ambiguous Fed policy, a possible Brexit in Europe (Great Britain leaving the EU) and the potential tumult and unpredictability of the U.S. presidential election.

Indeed, these are the days of miracle and wonder for markets, and we are going to have to look at it all if we want to make sense of things—and make the right decisions—with our money.

Helping investors make those decisions is my mission in the Next Week’s Winners advisory service. And while I guarantee I won’t be right all the time, I also guarantee that I will have reached my decisions via the soundest fundamental and technical data available—as well as the most rational analysis I can bring to the table.

Last week, that analysis included the biggest macro news event in recent memory… the pathetically weak May jobs report. That report showed that the U.S. economy created just 38,000 new nonfarm payroll jobs during the month.

The May print was particularly horrid, especially considering Wall Street was expecting some 160,000 new jobs created during the month. And while the unemployment rate did fall to 4.7% from the previous rate of 5.0%, The Boy in the Bubble Market it did so because more people just stopped looking for a job (and therefore ceased to be counted among the unemployed).

The May jobs data was by far the worst monthly employment report since September 2010, and the downbeat news quelled any thoughts of a Fed rate hike at the June Federal Open Market Committee (FOMC) meeting.

Though there’s still a slight chance that Janet Yellen and company will move the benchmark federal funds rate up at the July FOMC meeting, the data between now and then would have to be sensational in order to justify such a move.

Of course, the most important question to ask about this data point is—what does the market think about this development?

The initial reaction to the jobs report was a selloff in equities, but that selling wasn’t very powerful. And so far this week, the S&P 500 is up 0.80% (as of Thursday, June 9).

Still, I think that the market now is back to a state of mind that interprets bad economic news as actually bad news. That is a change of sorts from years back when bad news meant good news for stocks, as it meant more quantitative easing and more easy money from the Fed.The Boy in the Bubble Market

Yet what the market needs now is not more easy money, but rather a return of good economic data in order to sustain a material uptrend in stocks.

As of now, that good data—i.e. strong GDP growth and robust job creation—remains elusive.

Until we see the actual numbers start to impress, we could be in for a very choppy summer in this Boy-in-the-Bubble market.

Jim Woods is the editor of the Next Week’s Winners advisory service. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.

Get Next Week's Winners: The Ten Best Stocks To Own for Super Fast Gains NEXT WEEK

Share This