02/28/2021 — Predictably Unpredictable

Near misses really sting, but they are inevitable if unpredictable. Sometimes the best laid plans fall to pieces due to a mis-timing error — even one as little as fifteen seconds, or however long it took me to walk from my office to my kitchen. When the market continues to inexplicably rise and the end of the day approaches rapidly, it’s hard to not make a trade or two to take advantage of heightened volatility levels.

Of course, the market decides that is the perfect time to break south. With heightened concerns that the largest stimulus package ever may combine with the influx of new traders to create a powder keg of instability, the one constant that we can depend on is some degree of unpredictability. Every time it looks like trading has stabilized, there remains a distinct possibility for a sharp and swift downturn.

The United States has stepped into uncharted territory. The deficit to GDP ratio is near the highest it’s ever been and has matched that of the post WWII era. For all the talk of being in the middle of a “war” with the pandemic, make no mistake about it — it is not a war that has skewed this important financial ratio. We’ve changed our system immensely since the real estate debacle of 2008. No one, not even the powers that be at the Fed, truly knows what course these radical departures will take. One thing that appears likely is that a portion of the newest round of government checks will find its way into an already, overly liquid stock market.

In all likelihood the only safe prediction is to prepare for unpredictability like we witnessed last week. At present the S&P futures have rallied 25 points from Friday’s close. How long that will last is anyone’s guess.