As of this moment, before pandemonium breaks loose as a result of the Fed either succumbing to the whims of the President, deciding to cut rates or taking the opposite approach of hurling rolled up turd balls at the Commander in Chief in the form of no cut at all, the markets have decided that they have had enough of the earnings soap opera.
Witness the reaction to earnings reports today:
MDR -39%
GVA -25%
IT -19%
SSNC -16%
Our own GRUB falling by 8%.
The list is deep and somewhat depressing. It's not necessarily a function of earnings being terrible, but rather a market that has advanced substantially in recent months paired with an audience that is very frankly bored, at this point.
It's becoming obvious that market participants are demanding new forms of entertainment in order to remain engaged with their capital. That's a problem for the short to intermediate term.
By no means does this problem change the longer-term picture of a market that is going to chomp on bear testicles into year end. However, in the near-term investors should not underestimate the power of seasonality from August through September paired with a market audience with fleeting interests.
The most prudent approach in such circumstances is to swap aggressive beta for conservative beta. There's no reason to go into full on bear mode in the least bit. However, some prudence is required here in order to preserve gains year to date, as well as have capital available to rotate into more aggressive names for what should be a spectacular year end rally.
As long as the music keeps playing there's no reason to do anything but dance....just make sure you're in rhythm.
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