FOMO is back with a vengeance … Main Street continues to get worse … reasons why inflation might not be dead … but the Wall Street party is here And just like that, investors went from super-bearish to super-bullish.
We can thank Federal Reserve Chairman Jerome Powell for a large part of it.
From CNBC: A speculative frenzy after Fed Chairman Jerome Powell spoke last week helped drive record trading in call options Thursday…
According to Susquehanna, 40 million call options were traded last Thursday…
Those options were big market bets, like in the SPDR S&P 500 ETF and Invesco QQQ Trust, which represents the Nasdaq 100. We saw more Powell-inspired bullishness yesterday that we’ll discuss shortly.
But Powell’s comments merely accelerated a sentiment shift that began as soon as the calendar year rolled over.
As we noted earlier this week in the Digest, the market’s performance in 2023 ranks as the 5th best start to the year in the last 100 years.
The new bullish sentiment is resulting in a market attitude that’s been absent for a while…
FOMO.
(Fear of Missing Out) CNN’s Fear & Green Index finds that “Extreme Greed” is driving today’s market. 
But as this greedy sentiment is blossoming, conditions continue deteriorating on Main Street. ADVERTISEMENT Tonight: Investing Will Change Forever Tonight at 8 PM EST, a technological shift is going to permanently transform the financial world. And like any major financial event…
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See why, after tonight, investing will NEVER be the same. While the headlines trumpet the strength of the U.S. economy and Janet Yellen dismisses recession fears, everyday families are less optimistic If you missed it, on Monday, U.S. Treasury Secretary Janet Yellen all but told us that the economy is fine and there’s nothing to worry about.
From Yellen: You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years.
What I see is a path in which inflation is declining significantly and the economy is remaining strong. While that’s what Yellen is seeing, a study from LendingClub and Pymnts.com is seeing something else.
From Seeking Alpha: At the end of 2022, some 64% of U.S. consumers (166M people) were living paycheck-to-paycheck, up from 61% in the year-ago period…
That means 9.3M more consumers are living paycheck-to-paycheck.
What’s even more alarming, 86% of them earned more than $100K annually, underscoring the heightened scale of the surge in the cost of living.
Over half (51%) of that income cohort reported living paycheck-to-paycheck in December 2022, compared with 42% a year before.
Seeking Alpha conducted its own survey, presenting the following question to its readers:
As price pressures show signs of easing, do you believe there will be an improvement to your personal finances in 2023? The result was 67% of respondents replied “no,” they don’t expect an improvement in personal finances this year. This is dangerous for the economy because this negative belief can be self-actualizing if respondents close up their wallets to defend against a perceived bad economic environment.
As we’ve pointed out in the Digest many times, yes, Wall Street and Main Street operate according to different timing cycles. But the growing divergence of sentiment between Wall Street and Main Street catches our eye. The bullish enthusiasm from Wall Street also suggests that investors are focused nearly entirely on the Fed, to the exclusion of just about all else Sam Stovall, chief investment strategist at CFRA Research, put it this way: Just as the Fed is data dependent, investors are Powell-comment dependent. Here’s the prevailing Wall Street thesis… “Inflation is all-but conquered… so the Fed is on the verge of pausing rates, then cutting them, despite their hawkish talking points… we know this because Powell and Fed members are now talking about being ‘data dependent’ … so let’s get ahead of this by putting our money into the market now.” But there are many “what if’s?” that could derail this bullish sentiment.
Take the “data dependent” part of it.
What if, come spring/summer, the data show that inflation stops falling? Or even begins climbing again?
That’s a real possibility if energy prices begin racing higher.
On that note, let’s turn to legendary investor Louis Navellier and an internal email he sent earlier this week: Brent light sweet crude oil is expected to firm up as seasonal demand rises in the spring, especially since the million barrels a day that was released from the Strategic Petroleum Reserve (SPR) for 200 days in 2022 has ceased…
Now that China, Europe, and the U.S. are in the midst of an economic recovery, as global demand rises, crude oil prices are expected to hit $100 per barrel in the upcoming months and $120 per barrel prices are very possible during the summer months when there is peak demand. Energy costs represent 7% of the Consumer Price Index. If crude prices climb to $100 or $120 a barrel from their current price of less than $77, upward price pressure would follow. ADVERTISEMENT Luke Lango Reveals His Unusual 1,000% Target (it’s NOT a stock… or crypto) InvestorPlace’s Luke Lango is the king when it comes to 1,000% stock picks. Over the last few years his track record includes 18-different 10X investments.
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But according to Luke… This could help lead to several 1,000% returns in 2023. Learn more here. Also, get ready for upward price pressure from copper, which impacts countless prices throughout the broad economy Regular Digest readers know that we’re very bullish on copper. It’s a critical part of next-generation technology products. But it’s also critical for housing and infrastructure buildout, as well as countless everyday consumer products.
Unfortunately, there’s not enough supply to meet demand.
On Monday, we received the latest information on this, which points us back to inflation.
From CNBC: A copper deficit is set to inundate global markets throughout 2023 — and one analyst predicts the shortfall could potentially extend throughout the rest of the decade.
The world is currently facing a global copper shortage, fueled by increasingly challenging supply streams in South America and higher demand pressures.
Copper is a leading pulse check for economic health due to its incorporation in various uses such as electrical equipment and industrial machinery.
A copper squeeze could be an indicator that global inflationary pressures will worsen, and subsequently compel central banks to maintain their hawkish stance for longer. Speaking of “central banks” and their “hawkish stance,” bulls continue to discount hawkish comments while embracing anything that might pass as bullish We see this in how Wall Street reacted to comments from Powell yesterday versus Minneapolis Fed President Neel Kashkari, also speaking yesterday.
Kashkari said he believes the Fed’s benchmark rate should rise to an eventual terminal rate of not just 5.1%, but 5.4%.
From Kashkari: We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.
[The data] tells me that so far, we’re not seeing much of an imprint of our tightening to date on the labor market. There’s some evidence that it’s having some effect, but it’s pretty muted so far.
I haven’t seen anything yet to lower my rate path, but I’m obviously keeping my eyes open and we’ll see how the data comes in. Sounds pretty hawkish to me, especially since the latest data we have is the blowout jobs report that showed nonfarm payrolls climbing 517,000 last month, shattering the estimate of 187,000.
But the market ignored Kashkari. Instead, it’s taking its cues from Powell and his bullish breadcrumbs.
Yesterday, the market was quiet leading up to Powel’s speech at the Economic Club of Washington. Then Powell took the stage and said: The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector. But it has a long way to go.
These are the very early stages of disinflation. Stocks could have meandered lower based on the “long way to go” part of this. Instead, they exploded, presumably on the “the disinflationary process…has begun” part.
As Powell continued speaking, there were more comments that a bear could hang his hat on… - My guess is it will take certainly into not just this year, but next year to get down close to 2%.
- …If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have do more and raise rates more than is priced in.
- Our message [at the last meeting] was this process is likely to take quite a bit of time. It’s not going to be smooth.
And while there was some intra-day volatility, markets ended the day significantly higher, with the Nasdaq up nearly 2%. Taking what the market gives you, not what you think it should give you As I look at the totality of inflation and economic data today, I think Wall Street is leaning way too far out over its skis.
But what I think is irrelevant. Investors can cling to their narratives and miss the opportunity to make money, or they can accept what the market offers and profit.
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Have a good evening, Jeff Remsburg | 
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