Bizarro World, Explained

One of the greatest Seinfeld episodes ever is “The Bizarro Jerry”. This is where Elaine has a friend Kevin who does everything the opposite from Jerry, and there are opposite versions of George and Kramer, and even Newman, as well. There is a scene when Jerry, George and Kramer meet their Bizarro counterparts and Jerry mumbles “This is really weird”. I have found myself feeling this way lately as I look at our Bizarro world.

I saw a headline today that read “Stocks Drop After Better Than Expected Job Report”. We used to live in a world where more jobs than expected would be considered a good thing. And the markets would react to this good news by going up. And the world made sense. Now, the markets are hoping for just the right amount of bad news to come out about the economy – fewer new jobs, lower consumer spending, or a decline in home sales. And this bad news would be considered a positive signal for the market because right now good is bad and bad is good.

I believe this is all driven by the Fed and their desire to tame inflation. The chair of the Fed, Jerome Powell, has indicated a willingness to exact pain on the economy in the form of increasing interest rates until inflation has come back under control, even if this results in an economic recession. The markets are hoping that this pain will not be necessary and that a soft landing is possible where inflation can recede without the economy going into a recession. It is a delicate and sometimes confusing dance that may continue for many weeks or even months.

However, for long-term investors who measure results in years, I believe we will get back to things in our world making sense again at some point. The fundamental economic indicators like employment and GDP growth will once again be positively correlated with the stock market, so good news will once be considered good news. It’s the only thing that makes sense in the long run. So I will wait out the Bizarro world we live in right now and look forward to seeing a headline one day that says “Stock Rise After Better Than Expected Job Report”. And the world will make sense again.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.