Too many years ago, my friends and I had tickets to see a triple bill of Cheap Trick, REO Speedwagon, and Foghat at the New York State Fair. The real interest for me and another one of my friends was Foghat, a band that could effortlessly combine blues and sleazy rock ‘n’ roll. We got to our seats and then immediately learned that Foghat would not be performing that night. I cannot remember why or whether a reason was even given, but our mood tanked immediately.
But then the music began and the last of my friends arrived a few songs into Cheap Trick’s set. He brought us some drinks. Pretty soon we were having a good time. Cheap Trick was solid, a professional band with some well-known tunes. Then REO took the stage and played some long-forgotten rock tunes that weren’t as popular as some of the ballads that got all the airplay in those days. I think they played an even longer set to make up for Foghat’s no-show. They played a great encore and we headed for the parking lot in even better spirits then when we had arrived.
But then leaving the venue took a ridiculous amount of time. Traffic was insane. We had barely moved for 45 minutes. Now, we were hungry and unable to do anything about it, still trapped in the car. By the time we got back into town, the mood had collapsed, and we all just went our separate ways, hangry and miffed that we wouldn’t get to see Foghat anytime soon. If you were to chart the mood of that day, it might have looked like today’s chart of the S&P 500.
Mr. Jerome Hayden “Jay” Powell
Jerome Powell, chair of the Federal Reserve, may look like an unassuming, well-dressed attorney or investment banker (he’s both), but he just may be the total entertainment package. Reporters gathered for his 2pm press conference today with palpable excitement. The S&P 500 was up slightly from yesterday and had been trading within a fairly tight range for hours. Mr. Powell, stepped behind the podium right on time, said ‘good afternoon’ and announced that there would be a 75-basis point increase to their policy interest rate. He took 8 minutes to read a 4-page prepared statement and when those 8 minutes were over, the stock market had dropped 1.6%.
But he stuck around to answer questions and the mood in the room wasn’t dour. He hit on some classics that he has spoken before. There were a couple of deep cuts that went over okay. And wouldn’t ya know, after a total of about 43 minutes, the market had bounced all the way back and even hit a new high for the day.
He had done it. He started us off with a zinger that sent us reeling, but he worked the room and got us back in good spirits like he’d been playing clubs and small venues like this his whole life.
But then he left the room and the reporters dispersed. And then, the stock market players remembered that they had hoped for good news and didn’t get any. And so, they spent the rest of their day angry, selling off their ownership stakes in businesses like it was the final day of a three-day garage sale. The market dropped 3% from the day’s high, in just 75 minutes.
Just Another Day
The market has performed poorly this year and frankly, there isn’t much hope for a turnaround anytime soon. Jerome Powell offered nothing he hasn’t said several times before. The market isn’t done dropping and no one knows when it will find a bottom. But for me the chart above is illustrative. It proves that the efficient market hypothesis holds no water. The efficient market hypothesis states that new information is immediately reflected in stock prices and that neither technical nor fundamental analysis can give one an advantage.
Ask yourselves if there could have been any information shared in a small, 43-minute press conference held by one man, that could have logically produced the roller coaster of price performance this afternoon.