Ahead of the week: nowhere to hide from the bear market

Wall Street loves abbreviations and nicknames. Consider the “TINA trade” that went into currency when governments struggled to mitigate the effects of COVID-19.

With low interest rates, the Federal Reserve and the federal government injecting trillions of dollars into the economy, and the job market rolled back from its free fall caused by the pandemic, but not for long, TINA ruled investment markets. TINA means “no alternative”.

In the COVID-19 capital markets this meant stocks. Bond prices were already high, real estate was hot, and with lots of money looking for places to go, the stock market became the beneficiary of TINA trading. There was no other place for long-term investors.

Until Tina stumbled. Now investors have nowhere to hide. There is no alternative to the fear that grips investment markets.

Stock indices are in bear markets. This is the worst year for U.S. bonds in 30 years. Inflation is at the peak of generations, eroding the value of cash. There is no alternative to weathering in this evil environment.

Next week, the central bank’s privileged inflation sensor will attract a lot of attention. The personal consumer spending price index is expected to retreat from its multi-month rise. This will be an encouraging but uncertain sign that inflationary pressures may ease. This does not derail the Federal Reserve from raising inflation by raising the target short-term interest rate.

Inflation is not something that markets are worried about. This stagflation is a powerful combination of high inflation and a weak economy. That fear brought out the bears, and that fear did not weaken its grip.

If before there was no other place for investment capital than the stock market, when incentive efforts pumped money into the economy, now there is nowhere to hide investment capital, as work is underway to suck this incentive out of the economy.

Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is vice president of news. He was a former co-host and editor-in-chief of the Nightly Business Report on public television. Follow him on Twitter @HudsonsView.