Inflation has been rising significantly in recent months. So far, the stock market has completely shrugged off any concerns. But before dismissing all inflationary concerns, consider what has happened to the stock market in the past when inflation rose to the at which it now stands.
The Fed keeps saying that inflation is transitory. Is it or is it not? The truth is no one knows for sure. But gasoline prices may be about to offer an important clue as to which way this all plays out. If gas prices do what they typically do, then the skies may clear fairly quickly. But if they do not, the clouds of inflation may continue to gather and darken.
Technology is King, and the performance of technology stocks has been nothing short of remarkable. But few investors seem aware - nor seem to much care - about the troubled relationship between technology stocks and high inflation.
Sundial Capital Research is an independent investment research firm dedicated to the application of mass psychology to the financial markets. Sundial publishes the SentimenTrader.com website.
Our focus is not market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence.