Dear people of the future,
If you want to know what happened in the Great Whipsaw of October 2014 and looking for easy answers, well, there are none.
S&P 500 monthly
As the market closes after one of the craziest months in years, I have no answers. I can assure you, I was in front of my trading screens for 12 hours a day and I didn’t miss a single headline.
The S&P 500 fell 8% and then rallied 10.85% and the bond and FX markets were equally crazy.
I can offer no coherent explanation for the panic or the incredible recovery in markets.
At the start of the month there was a lot of talk about reallocation ahead of the end of QE3. That made some sense. There was also chatter about commodity fund liquidation after the drop in oil and that made some sense too.
Shortly after that, everyone got stupidly worried about ebola but it’s debatable how much effect that had. I’d argue it was very little.
After all the carnage, one headlines stands out: Bullard saying the Fed could keep QE going.
It came shortly after the bottom and I personally dumped money into stocks on that headline because it reminded everyone that the Fed will keep this party going forever.
Does the party end badly in the future? I suspect it will go on for awhile yet.
What doesn’t make a lot of sense is that Fed officials tried to walk back Bullard’s comments a few days later but the market just kept going. If I had to wager a guess, I’d still say Bullard changed the psychology of the market and made everyone realize that US growth is in a pretty good spot and cheap oil will help.
Or blame ebola, whatevs
-Adam
