The Narrative Vortex

The investor narrative has changed over the last couple of weeks. It went from everyone thinking a recession was a fait accompli to maaaaybe we can actually escape its grip.

Inflation is coming down. Wage growth is decelerating. Activity is returning to the housing market. And the labor market is still incredibly strong. Put all these together and it sounds like the odds of a soft landing are increasing. Both James Bullard and Larry Summers came out this week saying as much.

But then we got one day of softening data, and the S&P 500 fell 1.6%, its worst day in over a month. And so the narrative changed again. Forget about the soft landing. Bad news is bad news again.

Well, here we are two days removed from the narrative shift, and stocks had a heck of a day. The S&P 500 gained 1.9%, and the Nasdaq-100 gained 2.7%. Google announced massive layoffs, and so the stock had its best day since November, naturally. So, is bad news good news again?  What to believe?

I chase narratives like everybody else, but you wouldn’t know it based on my portfolio. And that’s the way it should be, for the most part. So prepare yourself because there will be a lot of back and forth this year as new information comes to light. Always but especially now, the key to investing is not to chop yourself up as the market struggles to choose a direction. Do not get stuck in the narrative vortex.

Have a good weekend.

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