This market update is unusual in that it follows closely on the heels of my last full market update on August 29, “S&P 500: Where we go after Jackson Hole,” and the brief update on September 13, “Ignore the inflation noise,” following the August CPI report.
With the S&P 500 (NYSE:SPY) resuming its downtrend following the August CPI report, and concerns about inflation and interest rates front and center, there is increasing uncertainty in the markets. It is in these periods of heightened uncertainty that the noise level becomes the loudest, increasing the risk of mistaking noise for signals.
A rapid and recessionary phase transition is unfolding within important sectors of the economy, which is well ahead of reported statistics. As bear markets create the greatest opportunities while exposing the greatest risks, it is in these periods that outsized future returns and current risks are on the table. Noise reduction is critical during such high-impact phase transitions.
Filter The Noise
The greatest source of noise today is the underlying trend of inflation and interest rates. As the stock market is intimately connected to both, filtering this noise is of utmost importance.
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