The “Honey Badger” Market

There is a LOT of optimism in the markets currently.

But why shouldn’t there be?

Speaking at Davos, the head of world’s largest hedge fund says “If You’re Holding Cash, You’re Going to Feel Pretty Stupid”.

“We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws.” – Ray Dalio, Bridgewater

Yes, indeed. Everything does seem to be firing on all cylinders as long as you don’t scratch too deeply beneath the surface. Even if you do, and see the ugly scars of minuscule wage growth, plummeting savings rate and surging delinquencies – investors just don’t “give a shit” as markets continue to rocket higher.

That lack of concern has led to the “Honey Badger” market.

Of course, I also remember this from 2007:

”A waning of the temporary factors that boosted inflation in recent years will probably help foster a continued edging down of core inflation. The U.S. economy appears to be making a transition from the rapid rate of expansion experienced over the preceding several years to a more sustainable average pace of growth.” – Ben Bernanke, February 2007.

The Fed’s official forecast, an average of forecasts by Fed governors and the Fed’s district banks, essentiallyportrays a ‘Goldilocks’ economy that is neither too hot, with inflation, nor too cold, with rising unemployment.

At that time, things were literally “as good as they could get.”

In 2008, Goldilocks was eaten by the 3-bears of a collapse in stock market, credit, and real estate prices. 

As Good As It Gets

But here we are once again. For investors, there is little evidence of a problem anywhere on the horizon.

Everything is literally as “good as it can get.” 

Let’s look at weight of evidence.

Economically speaking, things have rarely been better. The monthly Citigroup Economic Surprise index is hitting levels not seen seen 2004 and 2012. We can also confirm Citigroup’s index by comparing it to the Economic Output Composite Index which is also registering its highest levels since 2004 as well.

(The EOCI is comprised of the CFNAI, Chicago PMI, LEI, NFIB, ISM, and Fed regional surveys.)