That All-Important Market Narrative I Mentioned? It's Changing Right Now

There's a "collision" of drivers right now that holds just as much opportunity as danger...

I've written extensively about the critical importance of the market's "narrative," the financial and monetary forces that drive the action.

So naturally, the minute I spotted it, I wrote to let everyone know about a change waiting in the wings, a new narrative waiting to take the place of the "Trump growth" mindset that's moved stocks since November 2016.

This is going to have strong ramifications for every dollar you invest and trade from here right on out to at least the end of 2018, and very likely beyond.

So I put together a chart, as simple as it is striking, to show how this "collision" and change are unfolding right now.

Let's take a look...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

An "Unstoppable Force" Is About to Meet an "Immovable Object"

As a reminder, the market narrative is the overarching concept that is one of the most important things driving the markets. Since the U.S. presidential election, that narrative has been the Trump growth agenda, which is based on three legs, or pillars, if you will: lower taxes, less regulation, and more infrastructure spending.

With the new tax reform bill signed into law, one of those legs is firmly in place. The reduction in regulations is ongoing, but enough changes have been made (largely through executive order) to say two out of three are largely in place. The infrastructure plan was re-introduced and will take some tweaking.

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But outside the bursting of the volatility bubble (which seems to be largely resolved - it wasn't that big of a market in dollar terms), the main short-term market movers have been the new narrative - the "Fed Great Unwind" that will be the foundation of tightening monetary policy and will be accompanied by rising interest rates.

Here's a reminder of that narrative transition in visual form.

Market narrative

As you can see, I expect the narrative to change over time until "The Great Unwind" is all that matters to the market.

For now, we're in this "in-between" state. Let's look at the two key mileposts that will tell us which narrative is exerting the most influence.

  • How does the market digest important economic news? In the Trump growth narrative, good economic news sends the market higher, while bad news will send the market lower. In The Great Unwind narrative, the opposite is true. Good economic news will be bad for the market (because traders and investors will fear quicker or bigger action by the Fed), and bad economic news is good, because market participants will anticipate it will push Fed tightening actions further back.
  • How does the market react to news about the Trump administration or congress? In the Trump growth narrative, any news about lack of efficacy in the White House or on Capitol Hill will push the market down. News that makes the president look more "presidential" or that is supportive of key staff members will push markets up. In The Great Unwind narrative, news about the Trump administration in particular will have little to moderate effect on the market.

We indeed are in a "blended narrative," where both of those mileposts are showing up - and we can see that in one chart.

all-important

Stay tuned for more volatility. I sure will be ready to jump on fast-paced profit recommendations for my 10-Minute Millionaire readers. The markets are sure to get skittish every time news breaks that traders imagine will compel the Fed to raise rates faster. On the other hand, it's going to recover about as quickly, as traders and investors remember that earnings are strong, the full benefits of tax reform have yet to be priced in, and the global economy is booming.

Lather, rinse, and repeat.

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About the Author

D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.

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