The Price Action In Financials And Banks Are Telling A Different Story Than What Jamie Dimon Is Telling.

1.) DIMON – Every few months, a famous CEO says something cautious about the economy, and the financial media reacts like the world is ending. This week it was Jamie Dimon, CEO of JP Morgan Chase. If you only read the headlines, you probably came away thinking he told everyone to stop buying stocks. That would be wrong. It’s actually a great example of how financial headlines are designed to grab your attention but not necessarily explain what was actually said. The headlines want you to see this: “Jamie Dimon says don’t buy stocks.” What he actually said was that he personally wouldn’t buy the broad stock market at today’s valuations. He also said he wouldn’t buy long-dated Treasury bonds because he believes investors are underestimating inflation, government debt, and geopolitical risks. Saying, “I don’t like today’s prices,” isn’t the same as saying, “Everyone should sell their stocks.” Saying, “I’m waiting for a better opportunity,” isn’t the same as saying, “The market is about to crash.” The point is that following any famous CEO is not a great idea. This also isn’t the first time Jamie Dimon has made headlines with a “warning.” On June 1, 2022, he famously said an economic “hurricane” was coming because of Fed tightening and the war in Ukraine. He later suggested a recession could arrive within six to nine months. Those were not accurate assumptions at that time. But market analysis and timing aren’t his job. Running one of the world’s largest banks and timing the stock market are two completely different jobs. Some might even view his, or other famous CEO market warnings, as great contrarian indicators. Remember, healthy markets need financials and banks, and they tend to do pretty well in a reasonably healthy market. You can track those by XLF and KBE. This action tells me that this recent consolidation/pullback in the broad market is just that. A consolidation, not the end of the world.

2.) BUSINESSES – With all the negativity of war and rising prices, there are still some positive things happening in the economy today. Small to medium-sized businesses create and generate the most jobs in the country. So when they are expanding, it tells you a thing or two about how they are viewing the economy. If entrepreneurs were worried or downtrodden, I don’t think they’d be creating new businesses. This is an improvement in US new business applications that have a high propensity to create jobs.

3.) OIL – Yesterday, I questioned if the US trying to refill the Strategic Petroleum Reserve would push prices higher in the intermediate term. While I don’t have an answer for that, I do know that overseas buyers are in hot pursuit of US oil as the war scenario escalates, making US oil cheaper than Mid-East oil. US crude is drawing overseas interest from Asian and European refiners as supply concerns spread from the Middle East to the Black Sea. Excess demand from overseas only increases the potential for price pressure on oil. Oil hit that $94 resistance I’ve pointed to and is, so far this AM, down to about $90/barrel. The $87 area is now support. Signals are not yet suggesting that this recent rally is over quite yet either. I commented that inflation is reaccelerating, and a full-fledged return to breakneck exports would ultimately increase pump prices for consumers.