Some mildly decent news from the Retail industry's earnings reports so far this week may finally staunch the bleeding after a downward drift in the markets over the past week. Best Buy's (BBY) beat this morning on both top and bottom lines and Home Depot's (HD) double-digit jump in net growth may signify relative strength at the back-end of an overall lackluster — and that's being kind — Q2 earnings season.
It's becoming more and more clear that the market is anticipating an end to the Fed's QE Tapering program, and the lofty trading of most of this summer looks to be winding down in the face of reality asserting itself. Think of it as the market's version of cleaning all the spent plastic beer cups from the summer home and taking the pontoon boat out of the lake — fun as it's been, responsibility ultimately prevails (or it should if you know what's good for you).
Also, due to the utter lack of dominant narratives owing largely to the dog days of summer, what's being intensified right now is the spotlight on potential Fed policy shifts in regard to QE. My esteemed colleague Nick Kalivas published a comprehensive and informative piece called Sizing Up Jackson Hole yesterday, advising investors not to be shocked by a dialing down of asset-buyback policy from the Fed at its annual conference in the Grand Tetons.
Among Nick's findings is that while QE does indeed look to have assisted the economy's recovery since its implementation nearly a year ago, the net positives may well look to not warrant continuation in its present form. As a result, we're this morning seeing lots more attention being paid to what will happen with the ten-year T-bill rate and various pressures in emerging markets.
That said, we're literally grasping for meaningful narratives these days. Whichever policy the Fed eventually adheres to — and there's no guarantee we'll see any change upon this week's conference — it's nearly certain the shifts will be relatively subtle and digestible for not only the U.S. markets but markets and currencies worldwide. After all, it's called "Jackson Hole," not "Jackson Hol-y Crap!"
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