Trick or Treat? Inside the Latest Stock Market Selloff
Got that double-digit correction, but without the wolf.
Last SubStack was a warning, telling you as August began that the markets were too certain they were right about the “no landing” narrative. Macro values I measure had rolled over back in July at 4500, which meant a slowing was underway, and so I assumed that finally a recession was coming. As always, I make the forecast and then wait… for data. Macro is time-series analysis. It updates daily. Over time, it can roll over, but then slow its decline and bottom. When it changes, so does my outlook on the economy (and my investments).
In this case, macro has clearly slowed, but remember what the end game is: slow-and-low GDP and Inflation. And bull markets love moderation. Macro is slowing to target, which is a good thing—like threading the needle between a stock market selloff and economic overheating. Sure, it might overshoot and recede (that’s always the risk in cycles), but we’re not there yet. As for the S&P 500 at 4150, that value seems too certain that higher-for-longer has already killed GDP growth (which, by the way, if true would have killed inflation too). But rates at 5% are getting absorbed. As I forecast back in Q1, even the housing market is resilient. Surprised? You shouldn’t be. The pain remains mostly contained in the low-income, low-spend segment of the economy. (Don’t shoot the messenger.)
Meanwhile, the spenders—those driving consumption—have moved their cash to AmEx and Discover for an extra 4.25% of income and are not yet unemployed by AI. So the party goes on. It’s not booming, but it’s not busting either. And that’s where you often find the most deceptive moments in a bull market correction—moderation can mask deeper risks while also fueling the rebound.
Yes, I cried wolf. And I will again if I see another one coming. That’s the job. In our version of the tale, though, we have many boys crying wolf because they’re all connected to the internet. And their cries are amplified. Loudly. Repeatedly. It scares the village often, pushing the S&P 500 up 200 and down 300 in a scary October. We call it volatility, but it looks a lot like fear.
Does the market need a capitulation move down like other bottoms? Maybe. So be prepared. If it happens, those kinds of moves in bull markets tend to happen in a flash—tagging 3950 and then snapping back 200 points before most traders even get their shoes on. They are both trick and treat.
And while we haven’t seen a stock crash, the anxiety over a potential stock market selloff is real. It’s in the headlines. It’s in the breathless analysis. But for now, the data doesn’t back that up. Not yet.
The market still trades like a bull market correction, not the start of something worse. No one rings a bell at the top (or the bottom), but the evidence so far suggests this isn’t a meltdown—just another shakeout. And in shakeouts, the best opportunities tend to come right after the panic, not during it.
Keep your head on straight. Watch the signals. And don’t get spooked by every wolf cry.!
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