Market Flat, but the Party's Not Over Yet

Markets closed Tuesday mixed and muted, with only the Dow finishing in the green, up 0.2%. The Nasdaq sold off 0.34% on the day, with the S&P 500 down 0.06%. The small-cap Russell 2000 fell the furthest, -0.72% by regular trading close today. The Dow found its way to yet another all-time high today — almost a routine occurrence for market indexes these days.

Power outages following a severe weather storm cutting across Texas has sent Energy prices up over 7% today, with Natural Gas contributing 6.6% gains. Oil is up 1.2% on the day.

It’s not only equities enjoying the bullish sentiment, either — Bitcoin reached an all-time high intraday when it crossed 50K for the first time ever. The cryptocurrency drifted a bit into the close, but ended the day at 48,500 even, which is still an all-time high close. Over the past six months, Bitcoin has gone up more than 300% in valuation — making the previous multi-year peaks in late 2017 and early 2018 look like minor blips on the chart.

The bond market gained 1.3%, however, which adds some implications for broader investments: is inflation really so far off it’s not worth considering? With post-pandemic scenarios being priced into the markets and major liquidity remaining in place by the Fed, we are seeing growth in many segments of the economy. For years, real estate was lagging in price strength, keeping overall economic metrics flattish. But now that these are on the rise, are our quarterly, monthly and weekly numbers beginning to spell a new reality?

And would this new reality mean the party’s over for access to cheap money, thus weighing down buoyant sentiment in the general marketplace? We’re kind of in a perfect Goldilocks state at current: pricing in a big pent-up rebound without having inflation smack the fun out of the bullishness. But eventually we’ll arrive at that light at the end of the tunnel, and some new calculations regarding the way forward will be necessary.

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