Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday. The S&P 500 was down about .9%, today. A lot of red on the screens today all together, across all of the different indexes. And really, the main catalyst behind this seems to be a variety of different things, but one of the things is that the market has been quite concerned about kind of an inflationary environment. And then this week, we got a report that said the service sector wasn’t growing as fast as expected.
If you remember it, looking back throughout this year, pretty much all the reports have come out at higher than expected, and now we’re starting to get a couple that are worse. And then this morning, the report came out from initial unemployment claims, which was higher than it was last week, and they’re expecting it to be lower. And so these are things that the market kind of reacted, it fell pretty hard this morning. Actually, the S&P was down more than .9%, at one point today. And really, I think this is a buying opportunity, at the at those levels, as things start to come down, and now that they’ve bounced, maybe it’s a little bit mitigated, but here’s why.
One of the threats to the market is a hyperinflation type scenario, which was what we were kind of working towards here with this reopening. But the reopening has been very hit and miss. We’ve had some troubles with the supply chain, that’s kind of kept things from really taking off. We’ve had some troubles with the rest of the world, really kind of getting vaccinated getting back together. Australia, just locked down again, for another two weeks. We’ve got this delta variant just running around, and it seems to be more contagious and those types of areas. And so that kind of brings things back down, and what this does, and what we’ve seen today, it just to kind of take some of the pressure off of this inflationary valve, because it is one of the things that can happen.
Now, real hyperinflation like we’ve seen in the late 70s, and what have you, we haven’t seen for a really long time. And actually, the odds of having that I think, really, really low together, but the fear of that happening is what’s been driving the market, recently and kind of making it a lot more choppy and basically some growth, but nothing spectacular. I mean, I haven’t worn a green or red shirt in a really long time, and you can kind of tell what’s happening: The market has been going up, but not a lot. And so, when you moderate unemployment just a little bit, so it doesn’t get too tight, when you moderate the growth in businesses, so it’s still growing, but not too tight: That’s the Goldilocks Zone; that’s what we’re looking for.
And that’s basically what’s coming. When you have 10 year Treasury dropping back down below 1.3%, that’s a stimulative to the economy, and to the stock market as far as that goes, too. I actually see these as kind of good things, and I’m not the only one again. And we saw buying coming in today, but if it did get a little bit lower, again, if there’s some favorites, like we all have, like an Apple or whoever it is, might be a good time to kind of accumulate some of those. There is some issues that happen: When the Federal Reserve starts to pull back on their buying of these bonds, and when they start to raise interest rates, those are things that are legitimate issues that the market has to deal with. And so if you’re pushing on the economy really hard, and it’s growing so fast, they don’t really want to buy bonds and make it grow even faster, and they don’t want to keep rates low and make it go faster, so they would start to do the opposite. Well, when you start to get reports where things are slowing down a little bit, but not that much, that allows the Federal Reserve to continue to do what they’re doing: Continue to buy bonds for a little bit longer, and maybe continue to keep interest rates low. Those are good things for the stock market.
Now, we might have some big inflation at some point in time here as the rest of the world really reopens, but that’s probably a little ways off, and maybe somewhat delayed by these new variants. So really, really interesting timeframe. These types downturns don’t bother me at this point in time, just because again when rates are low, that’s a great place for the stock market; you always got to keep that in mind. And if things slow down on the inflationary front, that just allows the Federal Reserve to stay where they are for a longer period of time. This is a good thing, and this is why buying came in today.
So anyway, look forward to seeing what’s gonna happen tomorrow. I’ll be doing my weekly summary tomorrow at the beginning of the Talk Money with Tom show that we’re going to have. You can join us just go to talkmoneywithtom.com, 12:15pm to 1:00pm. You can ask questions or watch the other questions that are coming up and what have you. And of course, I’ll send out you know, that summary in our email list also. So look forward to seeing what’s going to happen. Thank you very much.