The Boringest Excitingest Market in History
- Jared Dillian
- The 10th Man
- May 18, 2023
I once had a cat who liked movies. His name was Otto—he passed away in 2014 at 15 years old. His favorite movie was The Matrix because there’s lots of action and explosions. All the action on the screen could hold his attention. But if we were watching Masterpiece Theatre or something like that, he’d wander off and entertain himself for a while. Too boring for cats.
Traders are a bit like my cat Otto. They are adrenaline junkies. They don’t care if the market is going up or down—they just want it to be moving. Well, the S&P 500 is roughly in the same place that it was three weeks ago. The stock market is hardly moving at all.
What’s interesting is that it’s not like there is nothing going on. We have bank failures, the debt ceiling, and increasing tensions with China. But the market doesn’t seem to care. Unchanged, day after day after day.
This isn’t without precedent. There have been plenty of times in history in which the market wasn’t moving much, like in 2017. At least during those periods, there was something to complain about. Today, there is nothing to complain about. But these days, people are still incredibly bearish, with most stocks above the 200-day moving average. Either investors are right, or the market is right. Guess which way the market is going to resolve?
This is the boringest excitingest market in history. Never has there been more of a divergence between excitement in the real world and dullness in the stock market. It’s not as though all financial markets are boring—the bond market is pretty exciting these days, especially in T-bills, with the threat of a debt default in the coming weeks. But stocks? About as exciting as picking out tube socks.
Cats Have Taken Over My Newsletter
My newsletter, The Daily Dirtnap, is typically about three pages a day. Earlier this week, I cut it back to two. There is nothing to write about!
I have already been over the debt ceiling and bank failures dozens of times, there isn’t much in the way of sector dispersion that I haven’t already written about, and I find myself writing the same stuff over and over again.
So, I am cutting back the content. I have been filling in with stuff about my book and cat pictures, but people are getting sick of the cat pictures. This is the first time in my newsletter career that I have ever had to do this. It brings me no pleasure. My guess is that the solution will become obvious at some point soon, and then I’ll be back to three pages a day.
The longer this goes on, the more convinced I am that stocks are going to resolve higher. It’s not as if the stock market doesn’t know about the debt ceiling deadline; it’s on the calendar, and it’s not that far away. I don’t know whether it will get resolved on time (I tend to think that it won’t), but when it does, you’re probably going to have a multi-standard deviation move higher.
There is a huge amount of cash waiting to be put to work. I have been getting emails from inexperienced investors telling me they have cash to put to work but are waiting until after the debt ceiling is resolved. Multiply that by millions of people, and you understand the scale of what the market might do in June.
How to Handle Boredom
Experienced traders know that the market is 90% boredom and 10% sheer terror. When I was a trader at Lehman Brothers, there was a lot of boredom. Sure, I had plenty to do, but there were also long stretches of time when I could do things like play fantasy baseball with the back-office guys.
Pro tip: Never play fantasy baseball with the back-office guys. They have even more free time than you do, and they will dominate you.
I’d usually spend that free time on enrichment. I would read books on trading. Or I would (no joke) take an afternoon and look at every single chart in the S&P 500. I’d look at charts of all currencies and bond markets throughout the world. Periods of boredom are opportunities for people with a natural curiosity about the markets.
Today, I am taking a lot of personal time. I am writing this 10th Man from my couch after coming home from work at 2 pm. I am enjoying the occasional cigar on my back porch, overlooking the pool. I am catching up on phone calls. And I have been shamelessly plugging my book.
This too shall pass. If things are boring now, you may as well enjoy it. At some point in the future, things will be exciting, and it probably won’t be the kind of excitement you like. But periods of boredom can last a long time. Pretty much all of 2005 and 2006 were a snoozefest. And you know what happened after that.
One Last Time
Like what you're reading?