“Better than Goldilocks”
“Markets make opinions,” goes the old Wall Street adage. Indeed, this sounds like a nifty thing to say. But what does it really mean?
The bears discover Mrs. Locks in their bed and it seems they are less than happy. [PT]
Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on. Moreover, if the market goes up for long enough, the opinions become so engrained they seek to explain why stock prices will go up forever.
After nine years of near uninterrupted stock market gains, new opinions are being offered to explain why the stock market will be bathed in sunshine indefinitely. For example, the late-1990s term Goldilocks is again being used to describe why the slow growth, low unemployment, economy is good for stocks. Apparently, if an economy is not-too-cold, but not-too-hot, stocks can go up lots and lots.
What’s more, these days everything is so perfect that Goldilocks is no longer a good enough descriptor. This was the conclusion that JP Morgan’s Jan Loeys recently reached, no doubt after peering at a 5-year S&P 500 index chart:
“We nicknamed this world ‘Better than Goldilocks’ two weeks ago. With global growth breaking out from its 7-year range and inflation still surprisingly down, we are graduating from a not-too-hot, not-too-cold Goldilocks world to an even better one for risk assets. It will not last forever, but could easily last long enough, given past momentum in growth and inflation forecasts changes, to have a positive impact on all assets with risky ones outperforming.”