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Is there anything that can knock the markets off of their skyward trajectory? In spite of everything–sticky inflation, trade turmoil, an under-siege Fed, sluggish job numbers–equity markets continue their stubborn climb.
So just what hell is going on here?
To find out, we kicked off a new fall season of Let’s Talk Markets Live with longtime Urvin friend Erik Smolinski–founder and head of Outlier Trading.
When this week started, it seemed that perhaps the markets were finally beginning to feel the pressure. Coming off of the Labor Day break, all three major indices–the Nasdaq, Dow Jones, and S&P 500 stumbled over a heap of headlines. Most notable among them was last Friday’s Federal Appeals Court ruling that most of Trump’s tariffs are illegal and that they exceed the authorities granted to the president by the National Emergencies Act.
The president pledged to fast track the appeal of this decision to the Supreme Court, and argued that "The stock market's down because the stock market needs the tariffs. They want the tariffs."
Our guest has a different perspective.
“I think that the market really cares more about certainty than it cares about tariffs, yay or nay,” says Erik.
Erik acknowledges that tariffs can be problematic in the short-term. But, he points out, “we’ve also learned that if you're big enough and you just donate to the government, then you're good.”
In other words, the biggest players in the market are prepared to pivot whichever way this goes. They just want an answer. And in any event, even our current uncertainty proved only a temporary setback. By midweek, the markets were all like…
We’re coming off of a summer in which the markets dramatically exceeded expectations and in which all three major indexes flirted with or exceeded records on a semi-regular basis. So do the markets stay hot even as the temperature cools?
FIND OUT WHAT OUR GUEST THINKS and get a Crash Course in Options Trading!
September doesn’t exactly have the best reputation among investors.
But Erik argues that U.S. markets have a pretty big ace in the hole.
“I am a firm believer that we are literally on the precipice of a world-changing technology rollout,” says Erik. “I think the value potential from it still isn't even understood. And I think that provides such a stabilizing force against everything else that's going on.”
What kind of technology are we talking about here?
“We’re still trying to understand the potential impacts from the full integration of AI,” Erik points out.
Oh yeah, that technology. But isn’t AI a big bubble just waiting to pop right now?
Actually, says Erik, “we're actually starting to see small initial impacts in terms of overall profitability of especially smaller companies. Smaller companies now have a different scaling potential than they did before, and I actually think it can increase competition.”
Dave recognizes the still unrealized potential of AI but questions just how much actual competition is taking place out there.
“There is just this massive level of corporate concentration in the US,” says Dave. “We've seen that in the market and in the returns that have been concentrated in just a handful of companies, and we've seen that in the corporate power that these firms exert.”
He points to a recent Google antitrust decision as an example. “A capitalist economy needs competition,” Dave points out. “And it seems like, every year, we're seeing less and less competition, and more and more concentration in the hands of very few firms.”
“But those Nvidia leap calls are going to hit,’ Erik notes. “So I understand this soliloquy. Sad for everybody. But…we made some money.”
Erik isn’t being glib. He’s making a point. Whichever way the markets are moving in Erik’s world, there is always a play.
“I always find myself interested in the gamesmanship behind it,” says Erik. “But from a trader's lens, all you have to do is figure out, ‘how does this flow through into price movement or volatility movement? Then go make some money on it.’”
Of course, figuring this out is much easier said than done, which is why we asked Erik to wrap the show with a crash course in options trading,
“Welcome to the degenerate side of markets,” says Erik.
You’ll have to watch this whole episode to see what he means.
https://www.globaltrading.net/citadel-routing-argument-vs-iex-doesnt-hold-weight-academics-say/
Thoughts @dlauer ?
