Blog: When good news is bad news
When good news is bad news, the market is priced for perfection. Market conditions have turned Fragile.
We've reached the point in the business cycle where good news is bad news. I've seen this over the years as a late cycle phenomenon when investors try to react with certainty over a very uncertain outcome. So any information that contradicts the accepted story is taken badly, and vice versa. In the current cycle the market has priced in a perfect soft landing. That means a continual slow-down in the economy and softer employment which investors think will inevitably lead to lower inflation and lower interest rates. So any evidence that the economy is getting stronger and/or employment is improving means that instead of landing, the economic airplane is taking off again. In other words, the aborted landing scenario I've been talking about since February which the market is not prepared for.