Wednesday's Market Minute: Things Could Get Really Bad

Look I'm not trying to be alarmist, but this could get really bad.

Number one is that as the Delta wave peaks and we exit the COVID regime, we also say goodbye to the major market catalysts behind the 18-month Crisis Bull Run. Those have been 1) tech adoption rate 2) low interest rates and 3) nothing else to do but trade.

It also means that the stimulus is drying up. The reality is that stimulus has been drying up for months, and the rate of liquidity coming into the economy peaked in the first quarter. We're walking into a liquidity vacuum as the rate of new spending slows just as interest rates rise.

Taken in an ideal economic context, this scenario could be palatable for investors nimble enough to catch the rotation in its nascent stages and safely hop from one trend to the next. But with inflation looking sticky and consumer confidence retreating, the economic backdrop is less than ideal.

Yet none of these are the most combustible powder in the keg. That’s Washington. Congress, an epicenter of friction that threatens to suffocate a fragile economy. We can't even get out of the blocks – we're stuck on the debt ceiling, of all ridiculous things. Don't think we would really default? The U.S. Capitol was invaded nine months ago. The Build America Better team can't agree on what to build. Why is the debt ceiling the line we won't cross?

The market is already about to get a painful reminder that beating COVID comes with a big side effect: higher interest rates and the end of the absurdity. Tack on literally anything else, and the stock market could become the haymaker follow-up to 2020’s gut-punch

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