Bloodless

I was asked several times yesterday why in the face of what to the ordinary person seems like a horrendous weekend for news did stocks power to new highs yesterday.  This would seem counter-intuitive to most and I appreciate that sentiment.  The best way to understand why markets were all in the green yesterday is that they are bloodless.  The market's guiding star for the most part is economic growth and future earnings, not the flesh and blood everyday occurrences that mark most human lives.  

There is no doubt that Las Vegas is a horrific national tragedy.  Talk show host Jimmy Kimmel probably expressed the feelings of most in his tearful opening dialogue last night and it's not like the people who buy and sell stocks don't have feelings as well.   However, markets, and the underlying instrument they trade, are themselves bloodless without a moral compass.  Investors and trader may look and weep at the tragedy that has occurred in Las Vegas.  They send contributions and perhaps volunteer to help out the victims of hurricane in Texas and Florida.  They send money to Puerto Rico.  However, they also weigh in on how those events impact forward US growth prospects.  If the events bring uncertainty or can be extrapolated as a negative then stocks will go down.  If it is seen as an event with little to no impact on the broader economic outlook then more likely than not stocks will shrug it off.  Las Vegas is seen by the markets as a moral tragedy but not an economic brake so stocks went higher as good economic news outweighed the events there.  You may be troubled by this but understand that all investors, whether they know this or not are in on this.  We are all complicit in weighing the cost of certain events against the economic backdrop, whether we invest money for others or you do it on your own.  In the act of investing money "this is the business we've chosen" and those are the rules....like it or not.

Remember this when either you or somebody you know scratches their head in wonderment on why markets are higher under the Trump Administration, for it's the same principle.  Investors don't have to like the President to appreciate economic growth and they don't have to like all of his policies or what many see as a  coarsening of the national dialogue to be happy with higher stock prices.

Back Thursday.

Rest in Peace Tom Petty.
                       "I wanna free fall out into nuthin"
                       "Oh I'm gonna leave this, this world for awhile"
                              Tom Petty, "Free Fallin", {Full Moon Fever- 1989}