Investors Remain Hypnotized
Once again all price dips remain bought as an early sell-off is brought to close the week green.
This despite Apple ($AAPL) warning that iPhone sales will fall a large 30% and the previous high correlation between the S&P 500 and oil prices broke Friday before the Doha weekend meeting.
Poor economic data continues to be ignored. Friday’s economic score featured a gain in the long standing Empire State Mfg Survey to 9.56 vs mostly a flat reading previously; but, Industrial Production remained flat at -0.6%, Consumer Sentiment fell to 89.7, and the New York Fed cut their forecast for GDP growth to only 0.8.
So, what’s the reason for the disconnect between the negative news and higher stock prices? Basically one thing—stock buybacks.
And, as Home Ownership becomes less achievable for potential buyers rent increases are also taking a toll:
Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red).
Dependent on the day (green) may mean leveraged inverse or leveraged short (red).
Institutional investors and even hedge funds aren’t buying this market strength yet.
Only corporate stock buybacks are boosting stock prices. In order for companies to grow, they have to start investing in cap-ex but this isn’t happening.
They’re only increasing debt, given low interest rates, to buyback shares. And this action means they’re just taking what the Fed is giving them.
In so doing they’re increasing the income inequality we hear so much about.
Doha OPEC meeting will be much watched Sunday although count me as a skeptic no matter the announcement.
Let’s see what happens