The tendency for investors to anchor themselves to bearish outcomes has become a feature of this market since the 2023 lows.
During 2022-2023 it was inflation, the Fed, with sprinkles of stagflation thrown in for effect.
More recently it has become recession, with shades of irrelevant historical comparisons to past shifts in monetary policy from hawkish to dovish that have caused markets to fall once rate cuts commence.
Once again, at its root, the bearish argument relies on recession being imminent, as it has been since 2021. Only this time it comes with a brand new caveat - the Fed dropping rates means it is even closer than it has been all those other years.
At its essence, the argument is silly.
The market will force investors into realizing this during the weeks ahead, with a series of moves that will force this mentality to be confronted in a manner that will be unpleasant for those who are on the wrong side of the trade.
Only then will the markets be allowed to entertain the possibility of the Fed being behind the curve, with recession being imminent, once more, even though the outcome will likely end up being much the same as all previous instances.
But that's an October/November story.
The path for the remainder of August and most of September is forceful, persuasive and demanding of those who fail to fall in line with the simple bullish ramifications of the long awaited shift in monetary policy.
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